Power Supply: Nigerians Await Buhari’s Magic Wand

With roughly 19 months left of the current administration’s eight-year tenure, Emmanuel Addeh asks whether any tangible results can be realised in the power sector, given that nearly nothing has changed in more than six years.

Last month, President Muhammadu Buhari, in complete deviation from what was almost becoming the norm of never firing his aides, officially removed the erstwhile Minister of Power, Mr Sale Mamman, said to have had one of the most uninspiring runs superintending over the country’s problematic sector. While a number of Nigerians applauded that singular action, not much hope has been raised by Mamman’s replacement, Abubakar Aliyu, who in his first public statement as head of the ministry admitted to not knowing much about the sector, save to rely on the expertise of the same big titles in the ministry who have failed to provide Nigerians reliable power supply in decades.

“I am not an electrical engineer or having anything to do with power in the past but I am an engineer and I know when something is going wrong I will detect it. I will not allow it and I will try my best to make amends…

“Don’t look at me as the minister of power that I have come to make magic. No, I am not a magician,” he told his subordinates on his first day at work.

To be fair, even before the utterance, literally interpreted as “don’t expect much from me”, many Nigerians actually never actually had their hopes too high, given that the sector has demystified even some of the country’s easily most hands-on and brilliant administrators.
Six decades of darkness

A country of over 200 million people, Nigeria is endowed with every resources needed to generate power, including large gas deposits, hydro, solar and even wind sources.

But the country still relies on roughly 3,500 to 4,000mw of electricity for its huge population, despite the often mouthed commitment by successive administrations, including the current one to give the country reliable supply.

In all those years, it would appear to be all motion, no movement as Nigeria is yet to come close to attaining any level of sufficiency in its pursuit of reliable power for its people and their businesses.

Indeed, a quick flashback beyond Nigeria’s independence will show that the country had its first semblance of electricity in 1886, when it had its first two power generators installed in the colony of Lagos, followed by the first electric utility company, known as the Nigerian Electricity Supply Company (NESC), which was established in 1929.

This was again followed in 1951 by an Act of Parliament establishing the Electricity Corporation of Nigeria (ECN), while by 1962, the Niger Dams Authority (NDA) was also established for the development of hydroelectric power.

This again underwent a major change in 1972 when the ECN and NDA were merged to create the National Electric Power Authority (NEPA), which before it was effectively liquidated, also failed to satisfy the needs of the country.

With the failure of NEPA, which was fully controlled by the government, the need to unburden the sector and allow the private sector players take part arose.

In 2001, the so-called reform of the electricity sector began with the promulgation of the National Electric Power Policy (NEPC), which had as its goal the establishment of an efficient electricity market in Nigeria.

In 2005 the Electric Power Sector Reform (EPSR) Act was enacted and the Nigerian Electricity Regulatory Commission (NERC) was established as an independent regulatory body for the electricity industry in Nigeria.

In addition, the Power Holding Company of Nigeria (PHCN) was formed as a transitional corporation that comprises the 18 successor companies (six-generation companies, 11 distribution companies and one transmission company) created from NEPA, culminating in the privatisation programme of 2013.

Yet despite all these seeming motions, there’s been hardly any movement as Nigerians hardly get 15 per cent of their daily energy supply needs till date.

Sad reality

Typically, only 3,500 MW to 5,000 MW of power is available for onward transmission to the final consumer daily, with the extensive losses attributable to weak infrastructure and a very high occurrence of significant technical and non-technical issues through the power supply value chain.

Nigeria has one of the lowest annual consumption of electricity per capita, estimated at less than 150 kWh, giving rise to the use of alternatives like standby generators. With this reality, any claim of commitment to climate change will remain a mirage.

Although generally regarded as the segment with the highest prospect, with installed generation approximately 13,000MW, generation plants still suffer from recurrent challenges such as maintenance and repair requirements, trips, faults, and leakages, that make them unavailable for evacuation to the national grid.

At the transmission level, at its best, the Transmission Company of Nigeria (TCN) has the capacity to wheel just about 5,300MW of power or thereabout.

It’s contentious which part is more problematic between transmission and distribution, but data shows that a substantial percentage of technical losses before electricity reaches the final consumer is attributable to the power distributors..

The World Bank estimates that the country would need to connect between 500,000 to 800,000 new households to electricity sources every year between now and 2030 to be able to achieve her targets of universal access to electricity for its citizens. But even achieving that remains a mirage.

Paying more for darkness

Between 2015 when the current administration took over government and 2019 when its first tenure ended, electricity tariffs increased by more than 300 per cent, even though electricity supply has remained typically poor.

In those four years, according to THISDAY checks, tariff climbed from N12 kWh to about N32kWh, further going up in 2020 to a conservative or lower range of N50per unit for some residential areas.

Although, Nigerians have not seen improved power supply despite the geometric rise in prices, industry players and government continue to insist that what Nigeria requires is a cost-reflective tariff.

The recently launched Service-based Tarrif (SBT) has also faltered. The Nigerian Electricity Regulatory Commission (NERC) neither has the capacity nor the technology to determine how many hours of electricity each household gets. Yet, billing is based on the number of hours of supply, thereby leaving Nigerians short-changed.

But NERC insists that pricing is one major issue that has to be dealt with in the sector before any meaningful progress can be made, stating that with good pricing, investments will naturally flow into the sector.

“This is because investment follows certainty. Nobody will invest where he is going to make a loss. But where you can do your projections and see that there is a return, people will invest.

“It is just pure economics and it is the same economics that applies to every business… the issue is that price drives investment. And when you attain the appropriate level of investments and achieve the economies of scale, price starts to come down. And you see in every sector this happens; it happened in telecoms,” Dafe Akpeneye, NERC’s Commissioner, Legal, Monitoring and Compliance, recently argued.

Decentralising the grid

Nigeria continues to operate a central grid system, which has obviously failed to serve the purpose for which it was set up.
An industry expert and Chairman of Momas Electricity Meter Manufacturing Company (MEMMCOL), Mr. Kola Balogun, while setting an agenda for the new minister advised him to reposition the power sector by decentralising the national grid, faulting the single grid system currently in place in the country.

“Why do we continue to have a single grid that binds all of us together? We need to separate it in such a way that any state or local government can go into power generation and distribution to people within its area.

“If the power being generated is not enough, they can even buy from the national grid. So, power generation and distribution should be removed from the exclusive list and moved to the concurrent List.

“That is why we are advocating for franchising, so that Nigerians will enjoy more supply. The entire process should be done in a way that investors are able to get back their funds while their customers will get fair bills in line with global best practices,” he argued.

Balogun noted that more investment was needed in the sector to upgrade feeders, transformers and substations across the country.

“If you are given an area to manage and you are bringing your investment, you need to recoup your investment and make profit on your investment. Power sector requires long term investments and loans should be considered for investors in the sector bearing that in mind,” he stated.

Balogun also called for an effective regulation of the sector, stressing that the NERC needs to be strengthened to carry out its statutory responsibilities.

“NERC must be given the power to sack and appoint heads of power generation, transmission and distribution companies if the need arises just the way CBN is doing in the banking sector.

“There is an element of discipline that is required for us in the sector in order to have a way forward, and this is currently missing,” Balogun added.

Erratic privatisation

Research and consulting firm, Agusto & Co., believes that since the privatisation exercise commenced in 2013, the Nigerian Electric Power Industry (NESI) has remained fraught with many of the same challenges ranging from unreflective tariffs to high loss levels, obsolete infrastructure, weak policy implementation and gas shortages.

“All of these have culminated in weak and erratic power supply and a dependence on self-generation by many businesses and households. Furthermore, electricity distribution in Nigeria remains plagued by high technical, operational and commercial inefficiencies,” the research firm said.

To truly achieve the objectives of privatisation, Agusto believes that reforms needed to be accompanied by a strong and enabling regulatory environment.

In addition, it stressed that improved access to finance, efficiency in billing and metering as well as consistent and secure gas supply were vital to reap the benefits of privatization in the long run.

Siemens deal: A viable pathway

For now, given the very limited time the current government is left with, it’s also impracticable to begin new projects. With the noise that heralded the signing of a deal with Siemens AG of Germany last year, one would have thought that government would keep the same energy in the execution of the agreement. However, enthusiasm has long waned.

The agreement which was meant to be implemented in phases was expected to see the upgrading of 105 power substations and the construction of 70 new ones.

Under the deal for which the government had made an initial N8.6 billion commitment, about 3,765 distribution transformers will be installed and 5,109 km distribution lines will be built with a potential generation capacity of over 13,000 mw as opposed to the current transmission of 4,500mw.

In phase one, 7gw was expected to be achieved between then and end of 2021, with the upgrading of transmission and distribution of the TCN and Distribution Companies (Discos) expected to contribute an additional 2gw.

For phase two, the government said that 11gw will be achieved between 2021-2023, with full use of existing generation and last mile distribution capacity, while the phase three will see the achievement of 25gw between 2023-2025 with appropriate upgrades and expansion in generation, transmission and distribution.

But since the Federal Executive Council (FEC) approved the payment of €15.21 million (N6,940,081,465.20) offshore and N1.708 billion onshore as part of Nigeria’s counterpart funding for the power deal, not much has been heard.

The deal also involves Siemens’ support for the regulator, the Nigerian Electricity Regulatory Commission (NERC), towards improving metering in the electricity industry in the country.

The project, touted to be a game-changer, has not seen any practical work as the federal government and the German firm have seemingly disagreed over the local content portion of the agreement while there have been delays in funding.

Chief Executive Officer of Siemens Energy Limited, Mr Seun Suleiman, speaking recently, however argued that the programme has not flopped, saying that the pre-engineering phase was ongoing and would be completed soon.

“We are doing the pre-engineering for the distribution network. We have already got a Letter of Credit (LC) from the federal government to start it, ” he said.

On this, President, Nigerian Consumer Protection Network (NCPN), Kola Olubiyo, said recently that the timeline given for the project completion was political, saying everything at the level of paperwork.

“We have seen the good intention but everything is on paperwork and the information we have now is that the German company is saying the COVID-19 is affecting the bringing down of transformers and their personnel from Germany,” he said.

Lamentations galore

After more than six years of the Muhammadu Buhari administration, those who are saddled with the responsibility of turning around the sector, continue to moan as if they were outsiders.

Minister of State, Power, Mr Goddy Jedy-Agba, who has spent years in the ministry, in what appeared a show of complete helplessness, lamented that with over 90 million persons still without electricity, Nigeria remains the most deficient country in the world in terms of access to basic energy needs.

Speaking at the 2021 edition of the Nigeria Energy Forum (NEF), led by Daniel Adeuyi, the minister said Nigeria’s huge figures in energy poverty remain a major challenge that must be resolved.

“About 2.6 billion people still lack access to clean cooking solutions. Unfortunately, Nigeria has the highest electricity deficiency globally with 90 million people ‘unelectrified’, while 175 million people lack access to clean cooking solutions.

“These are huge figures that must be addressed, because energy access underpins economic development, and enables other human capital, capital potential, such as access to adequate health care services, quality education, and economic productivity,” Jedy-Agba stressed.

With less than two years to leave government, other things being equal, Jedy-Agba, said a just power transition in Nigeria will feature the use of both clean energy technologies and natural gas as it aims to achieve universal access to energy by 2030 and net zero emissions by 2050.

“Figures show that this will require investment of over $400 billion in excess of business-as-usual spending between now and 2050, highlighting the scale of effort required,” he pointed out.

Illiquidity and other jargons

Many industry players believe that the lack of liquidity in the power sector remains the biggest challenge bedevilling the sector, insisting that the poor service Nigerians get is attributable to poor funding.

But then the argument flies in the face of logic. The quick question people ask is why the quality of power Nigerians get has not improved five fold between 2015 and 2021 since tariffs have increased by about the same margin during the same period.

Unlike in the telecommunications sector, where there’s rarely any report of Nigerians buying their radio masts and towers, in many areas in the country, electricity consumers provide their own supporting infrastructure like electric poles, transformers and meters.

This raises the question of what comes first: the chicken or the egg. Should investors bring in the funds for initial investment in the sector or should ordinary Nigerians fund the sector’s infrastructure deficit before receiving efficient services.

On the gas challenge, Nigeria holds the largest natural gas reserves in Africa and the ninth-largest globally with an estimated of 206 trillion cubic feet (Tcf) proven reserves, yet the liquid continues to constrain the power supply sector.

In a number of months, it will be judgement day for the Buhari administration, which hinged part of its campaigns on provision of electricity.