Power supply situation in Nigeria gets increasingly worse in spite of the recent privatisation of the sector
By CHUKS
OLUIGBO
Rewind to
November 1, 2013. Private investors finally took over 14 (four generation
companies and 10 distribution companies) of the successor companies carved out
of the defunct Power Holding Company of Nigeria (PHCN) from the Federal
Government of Nigeria, after being put on hold since the August 21 original
handover date when they completed payment for the firms. That event officially
ended the long journey to the privatisation of the power sector. The handover
took place simultaneously in Lagos, Ibadan, Port Harcourt, Abuja, Jos, Ughelli,
Kano, Benin, Shiroro, Kainji and Gombe.
The government
had, on September 30, done a shadow handover of the assets to the core
investors as it presented certificates of ownership to buyers of the generation
companies (Gencos) and distribution companies (Discos). With the physical
handover of the assets, the power sector effectively crossed the threshold of
government monopoly to one dominated by the private sector.
High hopes,
great expectations
From the
beginning of the power privatisation process, Nigerians had been full of hopes
that the epileptic power supply leading to incessant blackouts in the country
would finally end, that power supply would become stable, and that the
long-awaited industrial revolution which steady power supply was capable of
stimulating would finally begin.
Besides, hopes
were also very high that a lot of jobs would be generated as investors cash in
on the expected spin-offs along the whole value chain of electricity
generation, transmission and distribution. These spin-offs, analysts had
projected, would be in the areas of provision of prepaid meters, transmission
towers, line products such as insulators and arresters, transformers and spare
parts, adding that the development of this supporting industry would help to
facilitate the realisation of improved power supply in the country.
“If Nigeria is
growing at 7 percent without power, with steady power, the growth will double;
more businesses will start and employ people. Unbundling means that with
private sector investment there will be more businesses in upstream and
downstream. This will result in more job creation,” Sam Amadi, chairman,
Nigerian Electricity Regulatory Commission (NERC), had said.
In October of
last year, Oladiran Ajayi, energy expert and senior associate at Templars, a
law firm, told a top financial newspaper in the country that companies had already
started showing “cautious interest in investing in manufacturing, assembly and
supply of materials to service the emerging industry”.
“What we are
seeing at the moment is just a tip of the iceberg. We are seeing the beginning
of the private sector taking over an industry that has been running at about 10
percent when it could be doing 90 percent of business. Therefore, any investor
who has come in and taken an early position has a very good chance of very big
returns on their investments,” said John Delano, partner in charge of seminar
series on power at Akindelano Legal Practitioners.
In the area of
metering specifically, the analysts had projected that there would be high
demand for prepaid meters as a large number of homes and businesses were yet to
be metered. They also saw an opportunity for investors in that area, given that
the meters were in short supply as a result of long years of government
monopoly characterised by lack of sufficient investments.
“Many Nigerians
have already changed their meters to digital meters over the last couple of
years. We will still require millions of meters to be installed to service the
requirements of the electricity distribution companies and their customers. In
this respect, different types of meters will be required, including smart
meters. There are very lucrative opportunities here for either the manufacture
or supply of these meters across Nigeria,” Ajayi said.
Companies such
as Mojec International Limited and Momas Systems Nigeria Limited were mentioned
as some of those positioning themselves to meet the growing demand for prepaid
meters in the country, while in the area of filling the yawning gap in the
country’s transmission infrastructure, including lines and towers, Symbion
Power and Deepdrill Global Services were named. Paul Hink, managing director of
Symbion, was quoted as saying that the company planned to go into the
manufacturing of transmission towers in Nigeria. Similarly, Deepdrill was
reported to be in partnership with Maclean Power Systems to introduce to the
Nigerian market technologies such as non-ceramic insulators and arresters,
among others, for transmission lines as well as generation and distribution
lines.
Other
opportunities in the emerging power industry, analysts had projected, would include
the supply of remote sensing technologies and consumables such as spare parts
for power generation plants, equipment supply, particularly pieces of equipment
that improve the energy efficiency of power plants, provision of information
technology-related services and products that help to remotely monitor the
network including supervisory control and data acquisition (SCADA), provision
of payment systems and operation and maintenance services, and supply of
recharge cards to service consumers who choose to use prepaid meters. The
shortfall in gas supply infrastructure in the country, they said, also
presented a business opportunity for suppliers of steel, bolts and other
materials required for pipeline construction.
“There would in
fact now be electric power lawyers, economists, technical persons, among
others,” said one analyst.
There were also
projections of annual revenue generation in excess of N1.5 trillion in the
transitional electricity market, which was expected to be driven by the massive
metering of many Nigerian households and businesses that were yet unmetered,
improved output and efficient service delivery.
While Nigerians
basked in the euphoria, the investors themselves, as well as industry watchers,
also expressed optimism that better days were ahead.
“It is a
historic day for Nigeria as the private investors take over the assets. It is
probably the most important step in the privatisation process,” said Solomon
Adegbie-Quaynor, country manager, International Finance Corporation (IFC),
adding that the next thing for the investors would be to take stock of the
assets and prepare a good business plan, and then financiers would be willing
to provide further financing.
“We at IFC are
committed to supporting the power privatisation and we will engage with the
private and public sector stakeholders to make sure that the environment can
support further investment,” Adegbie-Quaynor further said.
Ayodele Oni, an
Energy Law and Policy expert and senior associate in Banwo & Ighodalo, a
top law firm, said: “It is great to be a part of the new vista that is opening
in the electric power sector. I had always firmly believed that the current
administration would achieve this feat provided the political will was in
place. My belief was premised on the fact that the structure adopted for the
privatisation of the PHCN successor companies and the reforms in the electric
power sector have been successfully adopted in several other countries of the
world prior to this time.”
Oni said with
the takeover by the private sector of the formerly government-owned electric
power generation and distribution companies, efficiency should greatly increase
as the tariff structure was such that it promoted efficiency, adding that the
more efficiently a company along the electricity value chain ran, the more
profitable it was likely to be.
No private
sector Genco or Disco, according to him, would accept the old order where
equipment such as transformers would be in disuse for several months without
repair because that would affect profitability as meters won’t run where there
is no electricity and then Disco may not receive payments for electricity which
did not flow (save for the fixed monthly fee).
Power supply
dips across the country
Contrary to
their high expectations of improved power supply post privatisation, Nigerians
in many parts the country woke up to total blackout in the immediate days
following the handover of the PHCN assets to private investors, putting
businesses and homes under acute stress.
The
deteriorating power situation was blamed on massive disengagement of technical
personnel at the various electricity distribution zones in the country by the
new investors. Indeed, the week following the handover of the power
infrastructure to the new investors was greeted with a gale of sacking of
technical and support staff responsible for faults clearing at various
installations – at a time many of the transformers across the country were
faulty. As a result, fault clearing at the distribution networks was stalled.
Reports also had it that in the wake of these disengagements, power workers
across the country downed their tools, an action which put many businesses and
homes in darkness as many could neither recharge their prepaid meters nor
rectify electrical faults.
In the Yaba
Mainland business unit of the Eko Electricity Distribution Company, in the week
succeeding the handover, it was observed that activities were paralysed as many
consumers milled around to see if they could recharge or get their complaints
sorted out all to no avail.
It was also
gathered that inadequate load allocation from the generation companies was
responsible for the drastic dip in power supply in parts of the country. For instance,
in the first few weeks post privatisation, Ikeja Electricity Distribution
Company (Ikeja Disco), which needs 900 megawatts (MW) on the average, was said
to be receiving a mere 300MW. At the same time, the available generation
capacity was put at 3,400MW. Some of the power plants had low output while
others were completely out. Egbin had 537MW, Afam VI 428MW, Okpai 458MW, Kainji
112MW, and Jebba 451MW. Alaoji, Afam IV and V, Sapele, Omoku and Ibom plants
were out.
Facing the
reality
But in the midst
of high expectations, analysts and industry watchers had advised Nigerians to
be patient, saying that the handover of the assets was just the beginning, and
not the end, of the journey to improved power supply.
“It is
pertinent to remember that this is really the beginning of a journey and not
the end of a journey as some have mistaken it to be,” Atedo Peterside,
chairman, Technical Committee of the National Council on Privatisation (NCP),
had said at an event on September 27 in Abuja, adding that the primary purpose
of the privatisation was to bring into play new owners with ‘deep pockets’ who
could finance and/or access financing for the rapid restoration of lost
capacity and/or add significantly new capacity to make up for decades of
government neglect and mismanagement.
Other analysts
had said specifically that Nigerians should not expect any significant
improvement in power supply in the immediate term until after four years, that
is, until 2017. This, according to them, was because investors in the power
sector might have up to four years to sort out challenges in the Nigerian
electricity market – including metering and transformer audit, upgrade of grid
levels, and manpower training requirements – before consumers could start
benefitting from the transfer of ownership of the PHCN assets to private sector
management. They said it would take about 36 months to train the level of
manpower that would be competent enough to handle the industry, adding that the
real technical input that would be required in the distribution networks alone
was yet to be ascertained because in-depth due diligence was yet to be carried
out by the investors.
“Everyone who
has been following this process would know that quick fixes should not be
expected. These are indeed challenging times. What’s currently being
experienced could be regarded as teething problems which every new comer to an
industry, process or programme typically experiences. I know that NERC and the
government are in talks with these investors to help mitigate some of the
challenges they are facing,” said Oni of Banwo & Ighodalo.
An analyst, who
did not want his name in print, said: “It would take a duration of three to
four years before requisite manpower can be developed, just as it will take
considerable time to carry out necessary due diligence to ascertain the actual
number of consumers and level of manpower needed.”
Reuben Okeke,
director general of the National Power Training Institute of Nigeria (NAPTIN),
agreed that it might take as much as three years to achieve some significant
improvement, adding, however, that if the investors in the distribution sector
effectively managed the power they receive, there could be significant
improvement in terms of supply to consumers.
As for the
generation companies, the analysts said it would take a little bit longer for
them to make appreciable impact. While admitting that it was normal to expect
improved power supply immediately after the investors take over, they, however,
advised Nigerians to be patient as there could be no shortcuts to achieving a
reliable and durable power supply.
For the new
core investors, who spoke on the sidelines of the handover ceremony, they
clearly understood the challenges ahead of them. Having taken over the PHCN
assets, they said, the first necessary step for them was to begin the arduous
task of carrying out proper evaluation of the acquired assets to ascertain the
level of upgrade and investment that would be required, going forward, to
improve power supply in the country.
“As at now we
don’t have full knowledge of what we are going to deal with until we have a
true picture of what is on ground. We are going to invest in metering, cleaning
up the system, cablings, transformers, and making sure that everything is in
line with what we have specified. It's not going to be enough, but we will
start with that. Our strategy is to continue to improve the system and
eventually we will get there,” said Charles Momoh, chairman, West Power and
Gas, buyer of Eko Disco, adding that they would be investing $250 million at
the initial stage as capital expenditure.
Kola Adesina,
chairman of the core investor group, New Electricity Distribution
Company/KEPCO, buyer of Ikeja Electricity Distribution Company (Ikeja Disco),
said: “You can only improve on something you understand. You don’t improve on
something that you don’t understand. The entire process, the entire chain, the
entire service that is being provided currently will be evaluated by us because
we have never had the privilege of a shadow management. So we did not have the
access into the building to evaluate the assets,” adding that everything to the
minutest element would be evaluated against the global benchmark and then the
upgrade of the asset would be done accordingly in those areas.
The current situation
The drop in
power supply has continued unhindered across the country. But as supply in power
drops, electricity consumers have been made to pay higher tariffs. In many
areas across Lagos, the monthly electricity bill has gone up by as much as 100-200
percent. It appears that the less of power supply the people get, the higher
the bill they are made to pay. And where consumers had expected massive
deployment of prepaid meters so that they would be able to monitor and pay for
only what they consume, the new owners have preferred the old system of
estimated billing, leaving consumers feeling short-changed.
Olusegun Abisoye,
a journalist who lives in the Okota area of Lagos, an area serviced by the
Ikeja Distribution Company (IKEDC), said that power supply situation in the
area has moved from bad to worse since the handover, while at the same time electricity
bill has simply gone crazy.
“Before the
privatisation, we got at least 10-12 hours of electricity daily, but now we
hardly get up to two hours. Meanwhile, the bills have gone over the roofs. I
live in a block of five flats. Before now our average monthly bill was N20,000.
But the first bill we got immediately after the handover was N38,000, close to
100 percent increase. For God’s sake, this was not what we bargained for,” he
lamented.
Another
respondent, who lives in Festac Town, Lagos, says power supply in her area had
been bad even before the November 1 handover, but it has worsened ever since.
“We use prepaid
meter. Before the handover we used to buy N3,000 recharge which would last
about two months, but the last N3,000 we bought since October is yet to run out
because there is hardly electricity to use it. We have resorted to generating
our own power, and it’s costing us a lot,” she told said.
As homes are
complaining, businesses too are lamenting as their cost of production and
operation has spiralled upward.
Meanwhile, the
new investors in the power sector are reported to be groaning under the burden
of acute revenue shortfall because the revenue leakages that existed before
they took over the assets are largely unaddressed. Investigation reveals that
they lose at least 53 percent of every N1 collected as revenue, meaning that 53
kobo of every N1 is lost, with analysts saying that plugging the leakages would
remain one of the greatest challenges the investors would continue to contend
with for some time to come because not much was done to mitigate the revenue loss
before the assets were transferred to them.
Goody
Duru-Oguzie, principal consultant/CEO, PowTech Group Ltd, says that so long as
the old structures on ground are still there, there will continue to be revenue
shortfall, adding that the investors must embrace new technology that would
enhance the performance of revenue.
Power supply to
the various Discos, it was learnt, has been on the decline because the
generation plants are not supplying them enough power due to gas supply
problem. Aside from the issue of generation, there are also the problems
associated with transmission lines. Most of the transmission lines are weak and
as such a large volume of power transmitted is often lost before it gets to its
destination. At the distribution level, equipment such as transformers, cables
and distribution networks are weak.
Heavy
investment is required in the areas of infrastructure that would enable both
the distribution and generation companies to reduce revenue loss in all the
value chains of the power industry, the analysts say.
Massive
investments required
Industry
watchers have hinted that the challenge for the new owners of the power assets
would stem from the fact that a low-margin electricity sector would be bumping
against high needs for capital expenditure. It was gathered that some of the
power networks have equipment that have been in use for over 40 years without
major overhaul done on them. Both the Gencos and the Discos have dilapidated
equipment that need to be completely overhauled. Therefore, massive investment
would be needed to undo the rot in the system.
According to
Kayode Akindele, partner at 46 Parallel, a Lagos-based investment firm, many of
the successful consortia that acquired the Discos and Gencos have contractual
undertakings with the BPE for aggressive capital development plans that would
“require significant fundraising in 2014 and beyond”.
In Port
Harcourt, Rivers State, for instance, the new Disco investors are targeting 14
million consumers from the current 530,000. According to Augustine Wokocha,
chairman of 4Power, buyer of the Port Harcourt Disco, “PHED covers four states
with a population of 14 million. As at now, only 530,000 consumers are
connected to the national grid.” This would require huge investment.
According to
analysts, capex (capital expenditure) estimates for the 11 Discos post
privatisation is N60 billion per annum for each in the next five years, while
Gencos will require $4.28 billion just to achieve full-installed capacity of
6,976.4MW.
At the handover
of Eko Electricity Distribution Company (Eko Disco) on November 1, Olusegun
Aganga, Minister of Industry, Trade and Investment, had said that an inflow of
investments worth about $40 billion was being expected in the sector in the
next 10 years. According to him, the power sector reform would attract immense
foreign investment into the country, increase access to electricity, improve
infrastructure and create employment for the country’s growing population.
However,
getting to a successful private electricity sector goes beyond just the Discos
and Gencos to include other players that will influence the viability of the
industry. The analysts say the Discos are at the end of a complex chain of
players in the power sector which include the gas suppliers, IPPs/Gencos, the
bulk trader, and the Transmission Company of Nigeria (TCN).
“You want to
make the whole chain, all the way from Discos up to gas exploration,
commercially viable,” said Citibank’s managing director and chief executive
officer for Nigeria, Omar Hafeez.
Making gas
exploration commercially viable would entail having an adjustment to current
fixed gas prices which, industry stakeholders say, is hurting gas exploration
and production in Nigeria. The fiscal terms, low prices and lack of
infrastructure are the major impediments to new investments, with gas
production projected to fall by 56 percent from current levels to 0.7 million
barrels of oil equivalent per day by 2020, while 73 percent of new gas
production would be uneconomic and up to $23 billion in new investments would
be at risk.
Nigeria’s
aspiration to produce 3-4 billion cubic feet (BCF) a day of gas by 2015 (from
under 1 BCF today) will require a significant infrastructure spend of $30
billion, according to stakeholders, an amount the government or NNPC is
unlikely to raise by themselves. This would make it impossible to power
existing plants which run mostly on gas as well as the 4,774MW from new NIPP
plants coming on stream soon.
Last December,
there were reports that independent Nigerian oil and gas companies were
positioning to play a major role in the emerging power sector, with Atedo
Peterside quoted as saying, in September, that the [current] stranded
generation capacity due to a lack of gas supply and transportation constraints
was in the order of 1,500 mega watts (MW), while a further 4,774MW is expected
to come on stream from the 10 NIPPs in 2014.
Nigeria has the
world’s ninth-largest proven gas reserves at 188 trillion cubic feet and
potential gas reserves of 600 trillion cubic feet (TCF). A misguided policy of
fixing domestic gas prices at low and often unprofitable levels has, however,
led to a dearth of investments into the sector. The prospect of attracting
large investments under the proposed PIB terms is also seriously at risk as
most gas projects are no longer economic.
“You cannot
have low pricing and a high fiscal regime and expect to have gas,” Austin
Avuru, MD, Seplat Petroleum Development Ltd, said in a presentation in Lagos
last November.
Nigeria,
Africa’s most populous nation, is targeting 40,000MW generating capacity of
electricity by 2020 and will need to spend about $10 billion annually for the
next 10 years to achieve this.
TCN seen as a
weak link
Meanwhile, the
Transmission Company of Nigeria (TCN) continues to be seen as a potentially
weak link in the system due to huge financing needs and quasi-government
control.
With the
takeover of the Gencos and Discos by private investors, all eyes shifted on the
TCN, which is saddled with the responsibility of wheeling generated electricity
to distributors for onward sale to consumers. There have been doubts over the
ability of the TCN to live up to expectations in certain areas of its envisaged
functions as Market Operator (MO) and System Operator (SO), among others.
TCN’s challenges
border on issues of grid reliability and stability, vegetation management,
human capacity deficiencies, and finance, according to Engr. A. S. A. Bada, senior
special assistant on transmission to the president, in a presentation, “The
Future of TCN: Ensuring Professional Management of and Investment in the
Transmission Network”. Other analysts add that the stability of the national
grid needs to be enhanced to ensure effective transmission of any quantity of
power being generated in the new dispensation.
On November 2,
a day after the handover, Don Priestman, the then chief executive officer of
Manitoba Hydro International, the Canadian firm that manages the TCN for
Nigerians, gave the assurance that things were changing for the good of the
electricity sector, observing, however, that it would take time and funding to
attain the desired evacuation capacity — especially as the transmission outfit
had for long been starved of funds for maintenance.
“For a long
time, the TCN was underfunded and did not have enough fund for maintenance… but
that is now changing; we are seeking funds; money is coming and I’m hopeful
that that the necessary steps will be taken,” he said, adding: “We are working
with government and the regulator to determine the amount of money that is
needed.”
Manitoba was
offered a three-year management contract for TCN in September 2012 to work with
an in-house team and take control of the daily operations of the company. The
Canadian firm is expected to revamp TCN to achieve technical and financial
adequacy in addition to providing stable transmission of power without system
failure. It is also expected that TCN would become a commercially viable and
market-driven company capable of evacuating the maximum capacity of energy
generated for distribution.
However, crisis
seems to be rocking the transmission company recently. On December 20, 2013,
reports emerged that the board of TCN had fired its CEO, Don Priestman,
appointing Mack Kast in his stead. Although no official reason was given, sources
at TCN said that “internal wrangling, lack of cooperation and many other
issues” warranted the abrupt sacking.
In a similar
development, Hamman Tukur, chairman of the supervisory board of TCN, sometime
in December wrote to President Goodluck Jonathan informing him that he would
resign from January 1, 2014. A replacement, Ibrahim Dahiru Waziri, has since
been appointed, with effect from December 24.
Against the
backdrop of the doubts over TCN’s capacity to the deliver the goods, the
Minister of Power used the opportunity of Waziri’s inauguration to charge the
principal players in the nation’s electricity sector to sit up and be committed
to ensuring that power supply was significantly and visibly improved by June.
“While we
celebrate the unprecedented success so far recorded in the reform of the power
sector, the yardstick, which consumers measure us, is the availability of
electricity at the last mile to our homes and businesses. I wish, therefore, to
charge all the principal sector players here today to commit to ensuring that
power supply to our customers is significantly and visibly improved by June
this year as already directed by Mr. President. Much is expected of us all and
the entire nation is waiting for us. The significant investment of the Federal
Government in both material and human resources must translate into improved
service delivery during the year. Government will no longer tolerate any excuse
of non-performance from any of the sector players from both the ministry
particularly and our new private sector partners,” Nebo said.
Reiterating the
critical role of national grid in a deregulated electricity industry, he
charged the new chairman of the TCN supervisory board to drive the management
of TCN towards creating a national grid that would be capable of reliably and
efficiently evacuating all generated power nationwide.
“The risk of
non-performance by TCN affects not only existing IPPs and Discos but also
nullifies all our effort towards creating a conducive investment climate for
the sector. You must, therefore, drive the management towards creating a
national grid capable of reliably and efficiently evacuating all generated
power nationwide. The board is also expected to ensure that only prudent
investments in transmission lines and substations are approved for
implementation. This is no time for projects with only fringe benefits to the
national economy. I also implore the board to take advantage of the numerous
PPP proposals on the table and provide the required leadership in seeking funding
for capital projects beyond annual appropriation,” the minister added.
Waziri, in his
acceptance speech, observed that the power sector transformation initiative was
the fulcrum on which the much expected and deserved take-off of the Nigerian
economy hinged.
“I fully
understand this. It is no exaggeration to say ‘as goes the power sector, so
goes the Nigerian economy’. This, therefore, places great responsibility on all
of us privileged to be serving in the sector to strive hard and harder still in
order to meet the legitimate expectations of our fellow citizens and other
stakeholders. To this proposition, I am fully committed,” he added.
To tackle the
challenges in TCN, Bada recommends transmission network expansion, dualisation
of critical lines to create relief, relief for congested segments of the grid,
implementation of the Super Grid concept which is estimated to cost $5bn, vegetation
management, human capacity development, and local manufacture of components.
However, it remains to be seen how well TCN will play its assigned crucial role
in the emerging power sector.
The NIPPs
In 2005, the
Federal Government set up the Niger Delta Power Holdings Company (NDPHC), a
special purpose company, to implement the National Integrated Power Project
(NIPP), the government’s flagship project that is mandated to add new
generation, transmission and distribution capacity to Nigeria’s electricity
supply industry and resolve its chronic supply shortfall.
The NIPP
generation portfolio comprises 10 gas-fired power plants with a combined design
capacity in excess of 5,453MW at ISO conditions and 4,774MW (net) with each of
the power plants incorporated as a subsidiary company of NDPHC.
The 10
generation plants include Gbarain (225MW), Ihovbor (451MW), Omotosho (500MW),
Egbema (338MW), Omoku (250MW), Geregu (434MW), Calabar (561MW), Ogorode (Sapele
451MW), Alaoji (961MW), and Olorunsogo (676MW).
Last year, the
NDPHC announced the decision to sell 80 percent of the 10 power plants, which
was informed by government’s intention to involve private sector operators who
have the technical know-how to run the plants in an efficient manner. In June,
it also ran a series of road shows in Lagos, London, New York and Hong Kong to
generate interest in the sale of the power plants, and by the July 19 cut-off
date, 110 bids were reported to have been received.
Meanwhile, it
was learnt that development finance institutions (DFIs) and Nigerian banks are
showing interest in mobilising funding for prospective buyers of the NIPP
assets. At an estimate of $1.2 million per megawatt, the sale of an 80 percent
equity stake by the Federal Government to core investors will amount to about
$4.5 billion.
The recent
privatisation exercise which has been described as “a big bang” seems to have
whetted the appetite of DFIs such as International Finance Corporation (IFC),
Africa Finance Corporation (AFC), African Development Bank, Proparco, Deutsche
Investitions und Entwicklungsgesellschaft and Dutch development bank, FMO.
“There is keen
interest from DFIs to invest in power projects in Nigeria. The expectation is
that the local commercial banks will continue to play their part and I think
what we need to look for is a situation where the appropriate party is taking
the appropriate risk,” said Femi Akinrebiyo, senior investment officer and
power sector country coordinator for Nigeria and Ghana, IFC.
Recall that Nigerian
commercial banks provided the lion share of the financing required by buyers of
the PHCN successor companies. The acquisition of the companies, which was
concluded with the payment of the 75 percent balance of the bid prices on
August 21, generated over $2.7 billion for the government.
For Ayodele Oni
of Banwo & Ighodalo, the reasons DFIs and local banks are interested in the
10 power plants would include the success recorded in the privatisation of the
PHCN power companies, despite the attendant challenges, especially since those
challenges were unlikely to be encountered in relation to the NIPP plants. All
of the NIPP plants, he said, are new plants without any liabilities or labour
issues as were encountered with the PHCN power companies, adding that the
prospective financiers would have done due diligence and were convinced about
the state of the plants.
If the NIPP
plants are eventually transferred to private investors, analysts believe it
would go a long to improve the present state of power generation in the
country.
Going forward
While Nigerians
grope in the dark, almost losing hope of improved power supply in the nearest
possible future, analysts have expressed belief that the situation would
improve as soon as issues ranging from dilapidated equipment, inadequate
generation capacity, gas supply and weak transmission are effectively
addressed.
They say the
most complex challenge for now remains the upgrade of the current grid levels. “Knowing
the grid requirement would enable them [the core investors] reduce technical
losses as it would aid them to determine areas that would require transformers,
those places that have weak distribution lines, and consumers that need to be
metered as well as other activities that will reduce technical losses,” one
analyst, who pleaded anonymity, said.
For Ayo
Obilomo, former managing director/chief executive officer, Eko Electricity
Distribution Zone, there would be need to embark on a campaign to educate
consumers on how not to waste energy by turning off their bulbs when not
needed, which would bring about a measure of improvement in power supply. “If, for
example, 10 megawatts serve 1,000 people, by the time the campaign on the need
to conserve energy is rolled out, the 10 megawatts could serve a few hundreds more.”
As it is, many
Nigerians say they have adopted a wait-and-see attitude, but deep in their
hearts, they cannot wait for the power situation to improve, and they are
willing to pay for every power supplied. This, they say, is much better than
the high premium they have to pay and the environmental hazards they expose
themselves to whenever they have to resort to their individual generators for
power supply.
