NIGERIAS POWER REFORM
The Socio-Economic Rights and Accountability
Project (SERAP) has put forward the fact that the administrations of former
Presidents Olusegun Obasanjo, Umaru Musa Yar’Adua and Goodluck Jonathan wasted
over N11 trillion meant to provide regular adequate and sufficient electricity
supply for the country’s needs.
From reports documented and propounded by Dr Oke
Yemi, Energy and Electricity Law, Faculty of Law, University of Lagos, the
amount of money squandered might reach N20 trillion in the coming years given
the rate of government investment and funding in the power sector amidst the reducing
fortune and recurrent revenue decrement. He said: “The aggregate approximated
financial loss to Nigeria from corruption in the electricity sector beginning
from the return to democracy in 1999 to date is over Eleven Trillion Naira (N11
This represents public funds, private equity and
social investment (or divestment) in the power sector, The country has lost
more megawatts in the post-privatisation era due to corruption, impunity, among
other social challenges reflected in the report.
“The much-publicised power sector reforms in
Nigeria under the Electric Power Sector Reform Act of 2005 is yet to yield the
desired and/or anticipated fruits largely due to corruption and impunity of
perpetrators, regulatory lapses, and policy inconsistencies. Ordinary Nigerians
continue to pay the price for corruption in the electricity sector–staying in
darkness, but still made to pay crazy electricity bills.”
“The Obasanjo administration spent $10 billion on
NIPP with no results in terms of increase in power generation.
$13.278,937,409.94 was expended on the power sector in eight years while unfunded
commitments amounted to $12 billion.
“The federal government then budgeted a whopping
N16 billion for the various reforms under Liyel Imoke (2003 to 2007) which went
down the drains as it failed to generate the needed amount of electricity or
meet the set goals. Imoke was alleged to have personally collected the sum of
$7.8 million for the execution of the contract for the construction of the
Jos-Yola Transmission Line, which was never executed. There were documented/reported
allegations of corruption against Imoke that fizzled-out shortly thereafter.
“Professor Chinedu Nebo handed over the assets of
the PHCN to private investors on November 1, 2013. Prof. Nebo is alleged to
have corruptly funded the privatised power sector with over N200 billion
despite privatisation. The allegation of N200 billion funding of the privatised
power sector during Prof Nebo’s tenure should be thoroughly and transparently
investigated and anyone suspected to be responsible should be prosecuted. Any
corrupt funds should be fully recovered.
“Our research revealed that the sum of N1.5
billion with which the vehicles were acquired was allegedly sourced from the
diverted N27 billion insurance premium of deceased workers of the
POWER REFORMS BY OLUSEGUN OBASANJO, UMARU YAR ‘ADUA AND GOODLUCK JONATHAN
There were the reforms, for instance, the 2005 Act, which provides for the
unbundling of the utility into different entities which happened during the
Obasanjo administration when Senator Liyel Imoke was minister.
the Power Reform Act was one of the most difficult laws to be passed in the
National Assembly for obvious reasons. But it was passed, and that was the
beginning of the reforms in earnest. With the passage of the law, Nigerians
started seeing the unbundling of the utilities into smaller entities and this,
in turn, saw them independently managed and being run more like business
entities. This, of course, was a step in the right direction heading towards
ultimately what we now see as the privatisation of these utilities.
All the structural amendments that needed to happen started during the
We now see that the Federal Government budget for the power sector was very
huge. Now, with the private sector buying in and taking some ownership through
the privatisation process, we are now seeing the Federal Government spending
less and the private sector taking more responsibilities for investment in
power supply. One of the crucial things that you will observe is that even the
National Integrated Power Projects, NIPPs and the investments that were made
there from the sale of utilities, the Federal Government has been able to
recover a substantial portion of those investments. When those investments are
paid for by their new owners, the Federal Government will also recover from the
power plants and the distribution network. The only place that the Federal
Government may not recover from is the transmission networks because those ones
were not privatised, the managements were outsourced. This means that with that
outsourcing arrangement, the assets still belong to the Federal and state governments.
Another thing that was also very critical with the reform in the power
sector by the Obasanjo administration was that, beyond the passage of the bill
and its implementation, Nigerians saw that the greatest challenge of power
which some people have continuously failed to appreciate is the availability of
gas. Most Nigerians fail to appreciate that gas, which belongs to another
ministry, is a completely separate investment being made by another entity.
Even efforts were made right from the Obasanjo administration to make sure that
everybody worked together to ensure the availability of gas for the new power
plants. Ultimately, there was a disconnect. The power plants were often ready
with the MDAs responsible for gas not being able to deliver gas to the power
The price of gas was also a big issue. Indeed, the pricing of gas is so low
that the oil majors have refused to drill and supply gas to the power
companies. Many also do not know that what we have now with the reform in the
sector is new gas pricing which is inevitable. With the new gas pricing, maybe
more people will invest in gas and we can now have enough gas to run the power
plants. What this means is that there is a lot of factors that need to be
addressed for you to have power.
Which is why it is extremely hazardous when over the years, you find in the
reform programmes , the power probe which went on, people began to bandy
imaginary figures- $16b, $10b, and so forth, without any evidence of any
records that such amount was spent in actual figures. The NIPP had about two
point something billion dollars allocated to it at the time.
Up until today, nobody has been able to establish where the sixteen billion
and ten billion being dropped here and there came about. But the truth is that
what the Obasanjo administration started in terms of reform, which was
interrupted at a point, is the same blueprint which is being implemented and is
yielding tremendous results. It all started with a technical committee under
the Obasanjo administration before NIPP. That technical committee was
responsible for delivering the first ever 4,000 megawatts. At the time the
technical committee resumed, power generation was down to 1,600 Megawatts, and
that technical committee had about twenty months to deliver the 4,000
It was the difficulty to sustain it afterwards that necessitated the
investment in NIPP.
Today, we are going about some 5,000 Mw because a lot of what the technical
committee did was to maintain old plants that were already down and had been
used beyond their life span. Those plants the technical committee rehabilitated
were installed in the sixties, seventies and eighties, and none in the
nineties. We must note that the NIPP was about adding capacity with a view to
selling or privatizing it. But private sector was not going to add that new
capacity because the reform in the sector had not kicked in.
There is no way that private sector would build generator plants when they
did not have gas supply and when gas was heavily subsidized. There is no way
that the private sector would build generator plants when clearly they did not
have laws and regulations that would guarantee them a return for their money.
So the Obasanjo government at the time decided that the NIPP investments should
be made and at the end, privatize. Now, the privatization that came at the back
end under the Jonathan administration is what we see today.
But if you did a study, you would see that there is a decline in investment
in generators by the Federal Government; there is also a decline in investment
in distribution network because of the investments that were made earlier. Now,
if the administration of President Muhammadu Buhari sustains the reforms, it is
just a matter of time for all that had happened over the years to begin to
yield very visible fruits in spite of interruptions by various probes and
In spite of the near reversal of the policies under the Yar’Adua
administration; in spite of the challenges of the bureaucracy of government,
the reforms have kicked in and they are sustained. A lot of people are now
talking about power being available and attributing it to the President’s body
language. I think it goes beyond body language, especially if you understand
how the power sector works. There are long lead times for these investments to
be made and there are long lead times for equipment to be ordered. There are
long construction periods within which all these will happen. They just don’t
happen within a few months of an administration coming into the office.
In fact, there is a need for some credit to be given for the vision of the
Obasanjo administration. Someone that must also be given credit is His
Excellency Nasir el-Rufai, the current governor of Kaduna State, who was the
Director General of Bureau of Public Enterprises. It was he who led the process
of reforms, including the drafting of the law at the time the Ministry of Power
and Steel was under the watch of Senator Imoke who worked with the BPE and the
National Council on Privatization to make sure that everything that was needed
was put in place. It is hoped, therefore, that the present administration of
President Buhari will sustain those reforms and create a conducive environment
for the private sector to invest in power.
The problem with power is that a lot of it is social service. It is not a
very profitable venture per se, but it is an area that there is significant
demand; and if the private sector meet that demand, it would certainly make a
return on investment. But if the public sector wants to meet that demand, it is
very unlikely that we are going to meet the expectations of our people. Yet,
for the private sector to meet that demand, it will need support from
government in terms of regulatory environment and making the business attractive.
The Federal Government can continue to subsidize tariffs to the down trodden
but the tariffs must be cost reflective if power must be delivered. Private
investors, on the other hand, must also work in a regulated environment so that
their inefficiencies are not transferred to the consumers. Above all, the gas
sub-sector must be revitalized to feed the power sector.
midst of the overwhelming and plenty storms facing the Nigerian power sector
today, the electricity market continues to be an exciting and lucrative long-term
investment opportunity. In the abstract term, we believe the greatest commercial
enterprise inflows to come into the coeval’s section which provides the largest
risk-adjusted returns at this point in time, as the total systemic risk appears
to be having an oblique position in favour of the Gencos largely due to autonomous
guarantees backing contracts in that section.
despite anything to the contrary, due to the fact that autonomous power plants
have in-built transmission culpableness (hence independent on the grid) they
are probable to continue to direct toward itself a larger share of investment
as the power sector evolves. In this regard, the National Independent Power
Plants (NIPPs) will be co-occurring as an essential constituent to accomplish a
major boost in electricity supply over the medium.