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Funding, policy inconsistency haunt Nigeria’s rural electrification access

By Emeka Anuforo, Abuja
20 November 2016   |   2:22 am
Nigeria’s rural electrification indices are not about to get better going by indications. This is due to lack of fund for critical expenditures, backlog of monies owed contractors and attention that seems to be focused on traditional electricity sources. This is coupled with the fact that government had in recent past attempted scrapping the nation’s…


Nigeria’s rural electrification indices are not about to get better going by indications. This is due to lack of fund for critical expenditures, backlog of monies owed contractors and attention that seems to be focused on traditional electricity sources.

This is coupled with the fact that government had in recent past attempted scrapping the nation’s Rural Electrification Agency (REA). And in line with the directive of the past governments, the Ministry of Power in 2009 commenced the winding down of the agency and the deployment of its staff.

The plan was however jettisoned in 2012 due to pressure from the National Assembly and many concerned stakeholders.About 60 per cent of Nigerians are said to be without access to the national grid. But the goal of Federal Government in reviving the agency is to increase access to electricity to 75 percent and 90 percent by 2020 and 2030 respectively, and at least 10 percent of renewable energy mix by 2025, as contained in the National Electric Power Policy (NEPP) of 2001 and the Rural Electrification Policy of 2005.
Experts are worried that this target like many others in the power sector may be nothing but a farce. Many years after it was proposed, the Rural Electrification Fund, which was meant to support access to electricity in rural areas, which otherwise will not have been attractive for private sector investors, has not been set up.

The Rural Electrification Programme was initiated in 1981 to connect all existing Local Government Headquarters and selected neighboring towns and villages to the national grid. REA commenced operations in August 2006, with all its projects centered on grid expansion to rural areas, via funding from the Federal Government’s annual budgetary allocations. It was set up to coordinate and promote rural electricity access, using private sector led approach and the rural electrification fund.

In the 2016 budget for the REA, the sum of N11, 894,170,138 was allocated. But indications emerged that the agency had not received up to 50 percent of the amount one month to the end of the year.Official data obtained from the agency showed it has a debt of about N7.8bn owed contractors. Some of the projects started many years ago were abandoned due to lack of funds, while many of the contractors were still owed, according to information obtained from the Ministry of Power, Works and Housing.

Out of the N7.8 billion owed the contractors, government has only been able to pay N1.2bn, as released from the 2016 capital budget.Despite the shortage of fund to meet the operations of the REA, experts have urged government to deepen electricity supply to Nigerians by developing and operationalising a rural electricity framework to ensure sustainable, affordable and reliable electricity to the rural communities and by extension, electricity access to about 75 percent of all Nigerians by 2020, in line with Vision 2020.
Acting Director General of REA, Engr. Mohammed Wasaram, who confirmed that funding still remains a major challenge, disclosed that there is an improvement in funding allocation.On projects, he told The Guardian: “We are in the process of awarding about 138 projects to the contractors that bided and became responsive in the REA Year 2016 procurement exercise, for both grid and solar system projects.  

“We have embarked on various projects, as appropriated in the Federal Government’s Capital Budget allocations from inception. However, as at the end of the year 2015, we have successfully completed 1275 grid extension projects and 101 solar system projects spread across the six geopolitical zones of the country, while we have about 1439 grid extension projects that are still ongoing.”
He was hopeful that the agency would enjoy a new lease of life in the coming years. According to him, “The good news is that President Muhammadu Buhari, in line with his campaign promise of improving power supply in the country, has magnanimously approved the long awaited Rural Electrification Strategy and Implementation Plan (RESIP), which has opened the window for private sector participation and partnership in the power industry, where Independent Power Producers (IPPs) in collaboration with the agency can participate and partner in providing cost effective electricity to the rural communities by contributing some substantial amount to the capital cost of the project, while REA through its Rural Electrification Fund (REF) provides the balance  as subsidy.
“RESIP will open the window of opportunity in the implementation of renewable energy in the rural communities. As soon as the implementation plan is approved and the REF is launched by the Hon. Minister of Power, Works and Housing, Mr. Babatunde Raji Fashola, the process will commence.”

The Minister of Power, Works and Housing, Raji Fashola recently hinted that government was planning to spend an estimated $150m on its intended rural electrification programme in the country, using 44 tertiary institutions and the small hydro dams in the rural areas of the country, as anchors for the programme.Though he didn’t give much detail about source of funding, he disclosed that the presidency had approved the Rural Electrification Programme.

To address the funding challenge, a presidency official told The Guardian that one of the key priorities of a new Nigerian Rural Electrification Strategy and Implementation Plan (RESIP), is the establishment of the Rural Electrification Fund.The Plan, which was recently signed by President Muhammadu Buhari, is expected to be officially launched soon.
The aim of the RESIP, which was obtained by The Guardian, yesterday, is to expand access to electricity as rapidly as possible in a cost-effective manner. Through the rural electrification strategy, government says “it aims to promote a full menu of rural electrification options–grid and off-grid (mini-grid & stand-alone) from thermal and renewable; ensure close co-ordination of rural electrification expansion with economic development objectives; encourage states, local communities and businesses to develop and contribute financially to rural electrification; and facilitate the entry of new market participants and continued development of local rural electrification (RE) ventures whose activities may include the production, installation, operation, maintenance, and distribution/sales of equipment, systems, and services related to power supply in rural areas.”

Government hopes to implement the Rural Electrification Implementation Plan using an independent Rural Electrification Fund operated by a Rural Electrification Agency. Among other things, the REF would be used to develop both grid-connected and off-grid rural electrification. It is to be comprised of contributions from government, donors and others in accordance with provisions of EPSR Act of 2005.
The Fund is to be open to bids from a wide range of organizations (developers) and would be used for funding of connections to supply  (grid and off-grid), but not for consumption through open competitive bids.It is also expected to provide a portion of the total  funding so that  other parties (distribution companies, local communities, business groups, etc.) would have to provide the rest.
The plan notes: “To make the Rural Electrification Fund work well, the key features shall be: clear policy guidelines within which the fund must operate, particularly the criteria for selecting between applications; transparent procedures for the operation of the fund and its bidding process; and proper accountability of the Fund e.g., independent audit, proper monitoring and reporting procedures, etc.”
It noted:  “The goal of the FGN is to increase electricity access to 75 percent and 90 percent by 2020 and 2030 respectively. This can be achieved only through a commitment to a rural electrification programme of unprecedented scale. This is because more than half of the populations are rural dwellers with low levels of electrification.

“Total capital costs to achieve this rural ambition by 2020 are estimated in the range of N1, 440b (US$ 9b). It will take time to establish the national capability required to expand electrification in rural at the enormous rate required.  Recognising this, an interim target proposed for 2016 is to add one million connections and 800MW of generation capacity in rural areas. This will require total capital of N192b (US$1.2 1).”
Government spoke of a new paradigm for rural electrification in the new plan. The plan notes:  “FGN is moving away from a purely y centralised decision and making approach to rural electrification. Instead, in recognition of the advantages of a bottom-up approach, the government will promote a centrally coordinated, but t demand -driven approach, that is, market-oriented approach to rural electrification.

This will be achieved in the following way: “A single national, sector wide, roadmap that identifies the least-cost electrification solution for every community. The natural owner of this plan would be the Ministry of Power. The plan would bring together all national interests across ministries, to ensure that all factors are considered. Then all participants – while acting separately – are working to the one plan.

“DisCos will add connections based on their contractual obligations and commercial needs: The privatisation contracts from BPE impose already an obligation on DisCos to add 4 million new connections by 2017. Their commercial objectives will tend to lead them to focus on urban areas.”
It went on:  “The REA will not define individual projects, conduct feasibility studies, or raise RFPs for defined projects. The REF will invite bids for projects that are defined by developers. It will allocate funds to those that best meet the obligations of the REF as defined by the Act. This will enable the most cost-effective connections to happen first – delivering the greatest number of new connections for the least cost.”

Government said the establishment and implementation of the Rural Electrification Strategy and Plan is a critical element in the achievement of the FGN’s rural electrification goals, objectives, and targets.”
Good policy, but the sincerity and capacity by government to deliver is always the issue. Time will tell.