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Stakeholders in Nigeria’s manufacturing sector recently held discussions with Engr. Beks Dagogo-Jack, chairman, Presidential Task Force on Power on the problems and prospects of the ongoing reform in the power sector.
By Dike Onwuamaeze
It was a rear opportunity for the cream of Nigeria’s manufacturing sector to meet and dialogue with those entrusted to superintend on the country’s power sector reform. The manufacturing sector has, in the last few years, been grapling with several effects of power outage especially on the running cost of business. On hand to set the tone for the day’s discussion was Remi Bello, president, Lagos Chamber of Commerce and Industry (LCCI). According to him, the LCCI appreciates the effort of the government in improving the power supply situation in the country. He, however, observed that there are evident transitional issues the drivers of the power reform have to grapple with, which include the crisis of expectations.
“The citizens had expected a much faster positive impact of the reform which is yet to happen and this is affecting confidence on the reform process. There is therefore need to reassure stakeholders in this economy that the power sector reform will deliver the expected outcomes. This dialogue offers the platform to articulate the issues and provide basis for optimism,” he said.
According to him, there are several reasons the government should ensure that the power reform works for the economy and the citizens. In a developing economy the government has a fundamental responsibility to provide infrastructure and security to stimulate private investment and guarantee real economic growth. Also, the success and failure of any government would be measured by its performance in this area as power is strategic to economic progress and the welfare of the citizenry. Bello advised government to insulate the reform from bureaucracy and political interference. The problem with most of the utilities, he said, is not lack of resources but appalling quality of management and scandalous corruption. These, he noted, are the bigger issues the country needs to deal with in its infrastructure reforms. Bello identified five challenges that stall the implementation of the power sector reform, which include the underestimation by the investors of the huge funds that would be required to resuscitate the facilities for power generation, transmission and distribution.
Other challenges include the lingering labour issues, gas availability and pricing, security issues and pipeline vandalism as well as tariff structure that is commercially and socially sustainable. “Investors need sufficient comfort in these areas because they are some of the concerns we have about the power reform,” Bello said.
Mrs Joana Olu Maduka, a council member of the LCCI and Nigeria’s first female engineer, noted that current power reform could be hampered by policy summersault as there is a process in the National Assembly to tamper with the reform. She said unstable policy was the major reason foreign investors shunned the initial privatization of 60 percent government stake in the power sector. Director-General of the LCCI, Muda Yusuf, said that the government could not in the guise of reform afford to surrender the power sector to the vagaries of market forces, otherwise, the people and the economy would pay dearly for it.
Engr. Beks Dagogo-Jack, chairman, Presidential Task Force on Power, allayed their fears, saying there was nothing to worry about. He said that the privatization of the Nigerian electricity market was unprecedented in both its scale and scope. “Never before has there been as broad a transfer of a critical sector from public to private hands. Many did not believe that so wide a privatization could be achieved. They were wrong and now the sector’s reform which was previously considered inevitable has now become irreversible,” Dagogo-Jack said.
He asserted that one of the consequences of the power reform was the birth of a new market for a nation that desire a massive socio-economic transformation. Consequently, the task ahead is how to carefully nurture the market to ensure its growth from infancy through childhood to a strong, viable and independent sector. This, according to him, could only be achieved through transparency, fairness, creativity and flexibility.
He traced the history of the current power reform to 2005 when former President Olusegun Obasanjo secured the passage of the Power Reform Act from the National Assembly. However, the reform has taken a new tempo since 2010 when President Goodluck Jonathan made it the cornerstone of his administration’s Transformation Agenda by drawing the Roadmap for Power Sector Reform. According to Jonathan, “the full implementation of the Electric Power Sector Reform has been a key priority for this administration. In developing this Roadmap we have built on the solid foundation laid down in 2001/2002 by the adoption of the National Electric Power Policy, and in 2005 with the promulgation of the Electric Power Sector Reform Act. This Roadmap heralds our advance to the final and very important stage in the reform process. This is the stage where we would ensure that the fundamental changes to the ownership, control and regulation of the sector envisaged by the legislation are achieved and the downstream benefits are realised.”
Some of the achievements made since this proclamation include the privatization of all the 11 PHCN’s distribution and seven generation companies at the sum of N416 billion on November 1, 2013, and the payoff of PHCN’s workers with N360 billion. This payoff as well as the subsequent transfer of “historic liabilities of (PHCN) to the Nigeria Electricity Liability Management Company (NELMCO) freed the Nigerian electricity market of any liability and made it ready for the much needed investment to meet consumer demand.” The financing of the initial investment was carried out by Nigerian banks without any foreign investment. Other achievements include the implementation of cost reflective tariff for gas in September 2010, the reconstitution of the board of National Electricity Regulation Commission (NERC) in October 2010, and the establishment of the National Bulk Electricity Transmission.
Currently, the electricity market is under pre transitional period when the industry players cannot be held accountable for supply or lack of power. This will last till the third quarter of 2014 when the Transitional Electricity Market (TEM) will be in place. TEM is based on the concept that people must fulfill their contract obligations or be sanctioned. “It will be a much disciplined market to ensure that more external investments will come in to build a stronger power sector,” Dagogo-Jack said.
He, however, explained that additional power generation has not translated to increased power supply due to past problems that have caused misalignment in the power value chain. But this will soon be resolved to enable the country generate 20,000 megawatts before the 2020 deadline. A new power generation project is ongoing in Zungeru, Niger State, the Mambila project is likely to roll out this year in collaboration with Chinese firms while the Azure power project, which is sited near Benin, is near implementation stage.
He disclosed that the second phase of privatization when the federal government would relinquish the remaining 40 percent it is holding is on the way. This would enable those who shied away from the initial privatization, especially foreign investors, to bring more funds. “This will happen at the debt and equity market. All that is needed is stability in the power market to attract long term finance,” Dagogo-Jack said.
Olufunke Dinneh, general manager, Legal, NERC, said that electricity commission’s concern is to ensure the availability of safe and affordable power to consumers at a sustainable tariff. This meant that the tariff must be cost reflective and fair to encourage efficiency and investment in the power sector. “NERC wants a balanced environment that would be fair to the consumer, government and the investors,” Dinneh said.