Power Sector: Setting the Agenda for Next President

Obinna Chima highlights issues that Nigeria’s next president must address to fix the country’s ailing power sector and improve electricity supply to homes and businesses.

Nigerians are expected to troop out this Saturday to perform their civic responsibility of electing the country’s next president, who will lead the over 200 million citizens of Africa’s most populous nation for the next four years, beginning from May 29 this year. One of the factors they would be considering is who among the top contenders can transform the country’s power sector.

Presently, the top four presidential candidates are Bola Tinubu of the All Progressives Congress (APC), Peter Obi of the Labour Party (LP), Atiku Abubakar of the Peoples Democratic Party (PDP) and Rabiu Kwankwaso of the New Nigeria Peoples Party (NNPP).

Indeed, adequate electricity supply stimulates economic activities in any country and catalyses nations’ drive towards industrialisation. However, in Nigeria, electricity to homes and businesses remain dismal due to poor policy choices, bad leadership and corruption. Since the return to civilian rule in 1999, there have been several attempts to ramp up power generation and supply in the country which has not yielded the desired results.

In fact, despite initiatives such as the Power Sector Reform Roadmap, that shifted the running of power utilities to the private sector, among several others, that raised the hope of Nigerians, power supply in the country has remained abysmal, accounting for one of the reasons for the poor performance of the Gross Domestic Product (GDP) growth Nigeria has seen under the current administration.

Under President Muhammadu Buhari, the Presidential Power Initiative (PPI), which was described as a strategic and systematic approach to solving Nigeria’s perennial problems of unreliable and inadequate electricity supply, was launched and the story has not changed.

Even with an installed power generation capacity of about 13 megawatts (MW), there’s a less than 5000MW of operational capacity in the nation’s grid, thereby putting the majority of the 200 million population at the mercy of expensive and high polluting alternative generation sources like diesel and petrol generators.

The PPI deal with Siemens is expected to improve the wheeling capacity of the transmission arm of the electricity value chain to 7,000MW in 2021; 11000MM by 2023 in phases one and two respectively, and further raise the overall grid capacity to 25,000MW by 2025. Unfortunately, the project is still at the implementation stage.

Observers have cited a significant lack of cohesion between the players from the Ministry of Power, the Transmission Company of Nigeria (TCN), Ministry of Finance and the Presidency, as a major factor that has retarded the progress of the project.

Clearly, the Nigerian power sector has seen some good ideas in the past eight years, but its main handicap has been implementation.

Therefore, analysts believe that the next president of the country must ensure that most of the initiatives outlined for the sector are implemented. The privatisation exercise that took place in 2013 created the power generation companies (Gencos) and the power distribution companies (Discos) but no significant progress has been recorded since the assets were handed over to the private investors.

On the other hand, the transmission infrastructure has witnessed minimal improvement in recent years. On generation, there are lots of stranded generation in the National Integrated Power Projects (NIPPs), but part of the challenges they face is the lack of adequate commercial gas supply contracts that guarantee them steady gas supply to their plants.

To this end, analysts have stressed the need for the next president of Nigeria to take direct ownership and leadership of the power sector, adding that, in the area of transmission infrastructure enhancement, the president must mandate the key players and have one responsible individual – be it the Minister of Power, preferably, or if required, consider the option of Presidential Taskforce on Power, as was the case under Prof. Barth Nnaji, some years ago.

According to the Chief Executive Officer of Proton Energy, Mr. Oti Ikomi, “We would need to have a single accountable individual who reports and takes directive from the president and the president must take ownership. That is very key. The president must take direct ownership and it is not just titular ownership, but technical, administrative and supervisory ownership, requiring perhaps, a meeting every week.”

He added, “We were informed recently that in the Egyptian example, Abdel Fattah El-Sisi, President of Egypt, used to have meeting every week with the key power operators to track progress. That showed seriousness and so, the transmission infrastructure was addressed. Siemens is willing to work with Nigeria, but we also must be willing to accelerate things.

“There has just been a total unnecessary slowdown. A project that should have been completed in one year is taking four years. — so that is for transmission.”

On how to fix challenges associated with power generation, analysts stressed the need for the next president of the country to design a special initiative to see how to tackle the challenges.

“The key challenge for generation, for both existing power plants like the NIPP plants and new greenfield plants have being the inability of the off-taker entity, which is the Nigerian Bulk Electricity Trading (NBET), to reach commercial bankable agreements with project developers.

“Nigeria needs to take a very positive and practical view of our credit rating and our historical experience as a nation. While we aspire to be treated in the credit ratings like countries such as Singapore and Malaysia, our experience has proven from the current debacle we are having with fuel, naira and other inefficiencies, that countries need a certain amount of guarantee and international lenders need guarantees that would support these projects”, Ikomi said.

He further said, “The Nigerian government, particularly in recent times, has taken a very conservative and retrogressive stance on completing Power Purchase Agreements and in particular, the necessary guarantees to give to project developers. The international standard is that a country must be willing to give some forms of guarantees.

“The world today in 2023, would ensure that we have bankable win-win guarantees between the Nigerian nation and the developers. We are aware of all the concerns around Azura project, but it must be recorded that the Azura project is live. It was live ahead of schedule and live ahead of total cost despite the guarantees. The hue and cry around the guarantees given Azura are sometimes misplaced and used to create intentional concerns in the polity.”

Speaking further, the former Chief Executive Officer of Keystone Bank said: “So, the next president of Nigeria must be willing to give guarantees to support projects, but they should be well-defined, legally constructed, technically and financially viable guarantees for Nigeria as a nation and the developers and this should be done within 30 days of the president coming in, so that the key projects that are hanging in there now, within the generation space, new projects and greenfield projects can come on track.

“Right now in Nigeria, it takes over 10 years to build a power plant, which is totally unacceptable. This should ordinarily not be more than three to five years. So, what we are saying is that the generation capacity that we expected in 2024, it is foolhardy to think that we don’t need to negotiate them now. The capacity that we need in 2030, we need to contract them now.

“So, the 2030 requirements, you are contracting them now. So, the government must immediately conclude at least 10,000 to 30,000 megawatts of new generation now.”

He, however, pointed out that distribution continued to remain a challenge in the sector, noting that the government had done the right thing in addressing some of the weak elements through its intervention in some of the Discos.

“Some of the Discos such as Eko Disco, Ikeja Disco and a couple of others are doing quite well. Their collection efficiency is high and they need to be encouraged. But some of the weaker Discos, the government needs to take action on them. The government has equity rights and it must implement that.

“The other point that is very critical is that we have a basic collection shortage in this country, whereby the last mile is never collected. That leads us to metering. We did the first phase of the National Metering Programme and we metered about one million customers. The next phase was to meter four million customers. Regrettably, that has also slowed down.

“So, the next government must make sure that the national metering programme is immediately restarted with necessary twists given to it so that we can approach a point whereby all Nigerian consumers are metered and there is no more estimated billing. That is because when you give confidence to the consumer, he is able to know that what he is consuming he is paying for and he is able to pay for it”, Ikomi added.

In his contribution, the Partner and Energy, Utilities and Resources Industry Leader, PwC Nigeria, Mr. Pedro Omontuemhen, stated recently that “Irrespective of your political affiliation, we can all agree that electric power is critical to our development as a nation.

“But there are several perspectives on the key solutions and policies that Nigeria should pursue to solve the crisis in the power sector. So there’s a need for all stakeholders and the incoming government to dimension the challenges and agree on the key policies to implement.

“This alignment is urgent if the incoming government is to deliver a sustainable and stable electric power supply in Nigeria.”

Also, former Chief Executive Officer of Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi, had recently proposed the restructuring of the TCN and the constitution of a presidential task force that would “drive power sector reforms and restructure the Niger Delta Power Holding Company (NDPHC) to release its 4000MW generating capacity.”

He also proposed extending invitations to local and international developers to sign new PPAs for 800MW of solar/wind in Lagos, Port Harcourt and Warri by 2025.

The Director General of Bureau of Public Enterprises (BPE), Mr. Alex Okoh, recently noted that some ongoing reforms targeted at the Gencos had worked and should continue.

According to Okoh, a legacy Genco firm that was privatised and listed on the stock exchange is currently attracting favourable attention from the public, which he described as an independent test of the viability of that business.

He said, “An aspect of that, which the present administration has made some good case is the issue of just transition. With Nigeria having 208 trillion standard cubic feet (tscf) of natural gas reserve -the ninth largest gas producer in the world, the country had been maligned and unjustly treated by the international finance community, with their their pressure on countries to move away from fossil fuel due to environmental considerations.

“We have gas today in Nigeria and we are going to use it from day one and we shall marshal all our resources, both within the country, internationally and in particular, get the support of the President of the United States on this initiative, so that when we speak to the G7 countries and the international finance community, they would agree and ensure that we get the necessary finance to support gas projects.”

He maintained, “The path to improve power in Nigeria, the most available and relatively cheap source of funding is gas. But we are hampered by the restrictions on gas financing. We are not saying we are not going to do solar, we are going to keep doing solar; it is complementary and we are going to do other forms of renewables, but gas-based power must be a top priority for the next president.

“The Decade of Gas initiative is a very good one. But it is very good in soundbites, but what we have on ground is very limited. We have come up with all these initiatives, but they are very limited. Yes, the Decade of Gas initiative must go on, but there is need for real implementation. Again, choose some projects, support some of the projects – gas-based power, gas-based for fertilizers, gas-based methanol or whatever – all of that should be implemented,” Okoh added.

To this end, it is believed that if all or most of these issues plaguing the power sector are addressed, it would lead to improved power generation and supply which would in turn have positive effects on the country’s GDP.