Opportunities and Challenges in the Electric Power Sector

Bart Nnaji

Nigeria   currently   generates   less than   5,00MW   for   a   nation   of   over   200 million, according to the National Bureau of Statistics. Even so, the transmission network often cannot transport the paltry amount of energy generated due to its fragility.The distribution network is also in a poor state.

In contrast, Egypt produces over 59,500 MW, and the level of power keeps on rising. South   Africa’s   56,000   MW   for   its   almost 60m people, less than a third of Nigeria’s, has long proved grossly inadequate; it has been   experiencing   load   shedding.   For Nigeria   to   become   a   middle-income economy, it has to generate and effectively transmit and distribute at least 100,000MW within the foreseeable future. This will mean tremendous   employment   and   business opportunities for millions of people.

The Aba Integrated Power Project (Aba IPP)   is   made   up   of   two   NERC   licensed companies: Geometric Power Aba Limited (GPAL) which has the 188MW power plant with a 27 kilometer 12inch gage gas pipeline and   APLE   Electric   Limited   (popularly known   as   Aba   Power)   which   is   the distribution   part   of   the   project.   Following the   commissioning   of   the   Aba   IPP   at   its headquarters   at   the   Osisioma   Industrial Layout   in   Aba   on   Monday,   26   February, 2024, by Vice President Kashim Shettima, GCON, on behalf of President Bola Tinubu, GCFR, interest in how the private sector can drive   power   development   in   Nigeria   has grown appreciably. Nigerians now feel that constant,   reliable,   quality,   and   affordable electricity throughout Nigeria is doable, as in Mauritius, Egypt, Botswana, Algeria, and Morocco.

I   would   like   to   use   this   opportunity   to publicly thank the government and people of this   great   nation   for   their   solidarity   with Geometric Power Limited, the owner of the Aba   Integrated   Power   Project.   Very   few things   in   our   recent   national   history   have united   our   people   as   their   support   for   the Aba Independent Power Project in the days leading to the commissioning and after the event. We truly appreciate the confidence in us   and   in   the   Nigerian   possibility.   The support is comparable to the nationalism and patriotism   we   see   anytime   any   of   the Nigerian   national   football   teams   play   a foreign team. There is still hope for our dear nation,   although   the   Aba   Power   Project, originally scheduled  for  completion  within three years, was commissioned a whole 20 years later.

There   are   greater   opportunities   in   the power sector than ever. The 2005 Electric Power   Sector   Reform   (EPSRA)   ended   the Federal Government monopoly in the sector.

The 2023 Electric Power Amendment Act, which amends the 2005 EPSR Act, enables states   to   create   their   own   electricity regulatory   commissions.   Some   states   have already   set   up   their   own   commissions. However,   here   is   a   word   of   caution:   the electricity   business   is   very   expensive   and also highly technical. It costs between $1.3m and $1.5m to  produce  a megawatt from a gas-powered   plant,   which   is   the   cheapest. This  doesn’t  include   the  cost   of  installing evacuation and distribution infrastructure for the generated power or the cost of O&M and staffing   to   operate   the   thermal   plant   24 hours a day. The Geometric Power Group spent almost $800m to build the Aba IPP including new substations and powerlines to distribute   power   to   nine   of   the   17   local government   areas   (LGAs)   in   Abia   State which we serve, as well as the 27-kilometre natural gas pipeline from Owaza in  Ukwa West  LGA  of Abia  State to  the  Osisioma

Industrial Layout. This is the largest single investment in the Southeast.10.   How   much   power   does   a   state   need? Some can make do with 100MW or less, but some   require   anywhere   from   150   MW   to 1000MW. How many states can afford the huge   amount   required?   If   the   source   of electricity is solar, coal, hydro, or wind, it will be  far   more   expensive.   How   will the states source the funds? Who are likely to be the off-takers or end-users? Can they pay the commercial rates? Akwa Ibom and Rivers states have built their own power plants, but what is their experience? Obviously, not so flattering. Must state governments that build power   plants   manage   them   and   the distribution network?

Since the Nigerian government has not been   effective   and   efficient   in   managing businesses in the last few decades, it should concentrate   on   providing   an   enabling environment,   including   making   the necessary   laws,   rules,   and   regulations   as well   as   policies   guiding   electricity development.

All   LGs   and   state   governments   in Nigeria   plus   the   Federal   Government collectively   have   a   40%   in   each   of   the distribution companies (DisCOs) privatized in   2013.   They   have   not   earned   dividends from the investments since the privatization. They should divest completely from them. As has been stated many times, electricity is a value chain business. A chain is as strong as the weakest link. Contrary to perceived wisdom, the electricity value chain does not start   from   power   generation   but   what   is called fuel to power, that is, the sources of power   like   natural   gas,   hydro,   coal,   the solar,   wind,   nuclear,   hydrogen,   etc.   The source must be treated with the seriousness it deserves.

I recently called for a state of emergency in the gas sector. I hereby reiterate the call for the emergency. All thermal power plants in   the   country   which   account   for   almost 80% of the  country’s   electricity are going through  a  very  difficult   period   because  of inadequate   gas   supply.   This   is   a   supreme irony.   Nigeria   has   proven   gas   reserves   of 206.53   trillion   cubic   feet   of   gas,   with estimated recoverable gas put at 139.4TCF. This makes Nigeria a rich gas province with sprinkles   of   crude   oil   since   the   crude available is only 37.1 billion barrels. If the acute gas shortages are not addressed soon with   the   required   sincerity   of   purpose   by stakeholders,   the   country   will   face   more severe power shortages.The Public Good, Not Private Agendas

One thing that has bedeviled the electric power   sector   is   the   lack   of   policy consistency.   This   lack   has   awful consequences.   President   Obasanjo established the NIPP to fast-track electricity development   and   devoted   a   fortune   to   it. However,   on   coming   to   power   in   2007,

President   Umaru   Yar’Adua   suspended   it. By   the   time   President   Goodluck   Jonathan assumed office in 2010 and brought it back to life subsequently, a lot of things had gone wrong.  For   instance,   work   was   suspended for   years   on   numerous   generation, transmission, and distribution projects. The clearing of electricity goods at the seaports had   been   abandoned.   The   payment   of contractors   had   been   suspended.   The demurrage   incurred   at   the   ports   was   not payable,   so   I   had   to   work   with   President Jonathan, the Minister of Finance, and the Customs leadership to find a way out of the conundrum.

Here   is   another   instance   of   policy inconsistency, or what Nigerians famously call   policy   somersault.   Immediately   I resigned   as   the   Minister   of   Power   on   28 August 2012, rumours began to fly around that I owned Manitoba Hydro  Company of Canada.   The   government   consequently announced   the   cancellation   of   Manitoba’s contract with the Transmission Company of Nigeria   (TCN),   though   it   later   reversed itself. A team was nevertheless dispatched to Canada to bring evidence that I owned the firm, only to discover that Manitoba Hydro is a state-owned enterprise that belongs to the government of Manitoba State, known as the   Province   of   Manitoba   in  Canada. The company was  set  up  in  1961 when  I   was only five years old!

Yet   another   example   of   policy summersault is the key nancing instrument which Dr. Okonjo Iweala and I developed to support   power   development   in   Nigeria without cos”ng the Government a fortune. The   development   of   the   electric   power sector has been stalled for years because of the   suspension   of   Partial   Risk   Guarantee (PRG)   to   support   power   purchase agreements   (PPAs).   It   was   this   instrument that enabled the emergence of the 461MW Azura-Edo Power Plant in Edo State.  With the partial risk guarantee (PRG), a private firm   can   have   the   comfort   of   building   a power plant knowing that an institution like the World Bank is providing such instrument to shore-up the payment of the distribution companies.   I   understand   the   financial implications to the country if it fails to meet its obligations to the GenCo, however these concerns should be addressed in the terms and   conditions   of   the   legal contract/Agreement,   rather   than   halt   the progress of the electricity generation sector totally. As things are now, no private sector investor   will   be   attracted   to   invest   in   the electricity   sector   in   Nigeria   despite   the enormous potential the market has if there is no bankable guarantee instrument.  The key driver   to   unlock   the   power   sector   for investors   is   availability   of   credible   and creditworthy off takers.  We need innovative solutions   that   would   provide   the   requisite comfort   for   potential   investors   and financiers in Nigeria’s power sector.

A   fourth   example   of   policy inconsistency is that I was able to secure the approval of the Federal Executive Council to build   a   765KV   national   Supergrid.   It   was meant   to   radically   improve   power transmission in the country. But the moment l left, the project was abandoned, as though it were my personal enterprise. The nation thus lost a golden opportunity to address its perennial   transmission   problem significantly.   I   am   glad   that   the   current Minister of Power, Chief Adebayo Adelabu, is reviving the Supergrid project.

Now,   the   last   example   of   policy somersault. The Presidential Task Force on Power   (PTFP)   was   set   up   under   my chairmanship   by   President   Jonathan   who also   appointed me his   Special   Adviser   on Power.   Made   up   of   a   fine   team   of accomplished and dedicated Nigerians from both   the   private   and   public   sectors,   it operated   in   an   agile   manner,   free   of   the bureaucracy   and   hierarchy   of   the   civil service. It was an immense source of ideas and   human   resources   when   I   became   the Minister   of   Power   in   July   2011.   The members   share   the   credit   of   our achievements. Yet, it was scrapped after I left   office   for   reasons   I   have   yet   to understand.

The cause of all this inconsistency was the   absence   of   commitment   to   the   public good.   Personal   agendas   overrode   public interest.   Phenomena   like   this   come   with costs.   Organizations  that   displayed  a   keen interest   in   the   power   reform   sector, particularly   the   privatization   of   Power Holding Company of Nigeria (PHCN) assets developed   cold   feet.   Jeff   Immelt,   then-global   chairman   of   General   Electric,   the most capitalised company in the world then and   the   world’s   biggest   electricity manufacturing firm, flew directly from the United States to the Ministry of Power, his first visit to Nigeria, to see how GE could work   with   Nigeria   to   develop   the   power sector.   Key   government   and   corporate organizations in the United States, Germany and   Brazil   signed   MoUs   with   Nigeria   to develop   the   power   sector.   There   were always teams of international media like The New   York   Times,   Financial   Times   of London, The Economist, etc, in the Ministry of Power. But with the inconsistencies they saw   in   public   policy,   they   failed   to participate in the privatization of the power sector in 2013. All Nigerians are today the casualties.Conclusion

We have   a chance to transform Nigeria for good. Our people do not ask for handouts. They like to work for their keep. But they can only work within the confines of the environment they live.   These   confines   are   defined   by   the infrastructure we provide to them. Can you imagine what our ingenious people will do if they suddenly have good roads, healthcare with   a   good   drug   industry,   a   good communication   system,   reliable,   quality electricity,   and   reliable   finance   sources? Then the making of the African Tiger can commence. It is in the best interest of each of   us   to   see   that   we   play   our   role   in providing this empowering environment.

Let us enable our very bright people to unleash   their   creative   instincts   so   that tomorrow   will   be   magnificent;   so   that   we can join the small train of mighty emerging nations   of   the   world;   so   that   Africa   can heroically have something to show for itself as   the   cradle   of   civilization.   But   more importantly, so that we live a higher quality life   in   our   own   society   with   our   cultural values   intact.   So   that   generations   unborn will look at our effort and be proud to have been   our   descendants:   the   descendants   of visionary people who laid the foundation for leap-frogging   our   people   into   productive modernity.

Before I round up, a word of advice for the graduating students of this great Federal University. One of the key success enablers for a university graduate is your disposition for getting rewarded for your education and experience

You should understand that the reason why   Obama   became   the   President   of America   is   because   he   sacrificed.   After Harvard Law School where he was the first Black   person   to   be   editor   of   the   famous Harvard   Law   Review,   he   had   over   600 highly lucrative job offers. He turned them all   down.   Instead,   he   went   to   Chicago   to work   as   a   community   organizer,   earning perhaps 10 times less than what he would have earned from those jobs. But then, he became the President of America and none of   his   classmates   stood   a   chance   of comparing to him on the world stage. When he   was   done   serving   the   public,   he   could have surpassed his classmates in income, if he so chose.

Finally, when our students graduate from universities,   they   normally   look   for   jobs. Only very few think of creating employment for themselves and others. Entrepreneurship is a major enabler for economic expansion in the developed and emerging worlds. We have not been quite successful in Nigeria in stimulating   young   minds   to   engage themselves in self-motivated initiatives that can   lead   to   the   sustainment   of   their livelihood and potentially others. I believe that high-quality education, especially in any professional   endeavor,   can   lead   to entrepreneurship,   be   it   in   Accountancy, Medicine, Law, Engineering, the Arts, etc. In the field of technology, we all know the story of Bill Gates, Steve Jobs, the Yahoo Founders:   Jerry   Yang   and   David   Filo;   as well   as   the   Facebook   creators,   Mark Zuckerberg,   Dustin   Moskovitz,   Eduardo Saverin,   and   Chris   Hughes.   All   became stupendously wealthy as young students or graduates   like   yourselves,   determined   to solve a problem and in so doing, create new ways   of   doing   things   in   the   world.   They were   courageous.   They   believed   in themselves. I believe that many of you have similar   characteristics   but   may   not   have come to an understanding that you can do the same. I challenge you to think about this.

One way to ensure that you are making the right contribution if you are lucky to find a job or to be part of the creation of the company is to always ask yourself; “What value do I bring to this enterprise? How does what   I   bring   impact   my   organization,   my society, and the humanity of people in my country or even Africa?” Do not ask, “How do I maximize my personal benefit from the value I bring to this enterprise?” Resist the temptation to be a hawk in a field full of chicks.

Like the fountain of spring water from a rock, go out there and be a fountain of great ideas and solutions where your rock is the pillar of integrity. Ask yourself how can I be part   of   doing   something   great   that significantly   and   positively   impacts   my society?   How can I balance living well and doing   good   deeds?   How   can   I   stand   out among my peers so that those who follow me will say, “I want to be like him.”

Go out there and be a shining example of what   Nigeria   and   Africa   can   give   to   the world. Become part of a movement that will drop   Nigeria   from   the   list   of   the   most corrupt   nations   in   the   world.   Be   a   game changer. Change your world as many young Africans   are   already   doing.   Become   the reason   why   Nigeria   will   be   an   industrial economy.   Give   something   of   yourself   to society   without   expecting   much   in   return. Refuse   to   be   mediocre.   Become   an   asset rather than a liability.