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The power sector puzzle: Willing seller and unwilling buyer


Electricity Pole.

Titi (Power Generation Companies, GenCos) is an akara seller (Electricity Generated), she was approached by Mama Jubril (NBET- the Government appointed bulk buyer and wholesaler who promises to buy the power and provide payment guarantee to the GenCos) who promised to pay for all her akara. Mama Jubril, further informs Titi that she has willing and capable customers she can sell to (DisCos- who buys from NBET and sells to Nigerian home users and industries) and pay Titi for the one thousand (1000) akaras (All Electricity Generated and put on the Transmission Grid). Titi agrees with Mama Jubril knowing that the Oga at the top (Federal Government, FGN) is behind her and has promised to guarantee and pay for all akara Titi can produce.

In a similar vein, for better transportation arrangement, Mr. Okafor, the van/truck driver (Transmission Company of Nigeria (TCN) managed by FGN) who is responsible for the delivery of the akara was introduced to Titi by the Oga at the top (FGN). Mr. Okafor promised he can deliver (can transmit over 5,000MW of electricity) the akara Titi produces. Titi raised the issue of possible truck failure with Mr Okafor but he vehemently argued that he has several plans in the pipeline to put his truck in place and even increase his capacity to deliver more than what Titi can produce.

Titi, in order to avoid disagreements, insisted that they all sign agreements. She signed agreements with Mama Jubril (Power Purchase Agreement, PPA), Mr Okafor (Transmission Agreement) and the Kerosene or firewood sellers (Gas Sales and Transportation Agreements GSA & GTA). In order not to disappoint Mama Jubril, Titi quickly ran to various banks including UBA, Guarantee Trust, Sterling, and Standard Chartered Bank etc., for loan facilities and signed agreements with them.

With all these guarantees from all parties, the loan was given to Titi to enable her buy her ingredients: beans, utensils, frying pan, crayfish, pepper, onions, salt, oil (representing spare parts, lube oil, machine operators, water usage/rights etc.) and firewood or kerosene (Gas), Titi even hired some boys and girls (O&M team, plant operatives, etc.) to help her out for quick and efficient production of the akara.

Titi prepared the one thousand akara (electricity) as agreed, and sent it to Mr Okafor for delivery. Mr Okafor starts complaining of having problems with his truck and that he can only deliver 800 akaras (who pays for the additional 200 akaras already produced?).

Out of the 800 akaras, he carries on behalf of Mama Jubril (NBET) to her customers (DisCos), about 300 akaras were further rejected (power rejection by Distribution Companies, DisCos) because according to them Mr Okafor delivered them to the wrong address. They prefer another address. Mr Okafor, responding to them, said he is a Government driver and can only deliver the akara to the addresses his supervisor (Systems Operator, a Unit under TCN) gave to him.

Deducting 500 from the original 1000 akaras agreed to be produced, that is after the rejection both by Mr Okafor (Transmission) due to his truck condition as well as the akara rejected by Mama Jubril’s customers (DisCos) due to wrong address, of the remaining part sent to Mama Jubril (NBET), she pays whatever she likes, sometimes she pays for 120, 200, 180, 150 or 110 as the case may be. Mama Jubril’s excuse is that her customers (DisCos) refused to pay her after selling (distributing the electricity generated by GenCos) the akara.
Then on the other hand, Titi’s akara consumers are asking her to produce more because her akara is “one in town” and that she should increase her production to two thousand since the one thousand, she is currently producing is not enough.

Titi (GenCos) loves making akara (Generate more electricity) and wants the economy to improve since her akara (electricity is the lifeblood of the nation) is considered “one in town” and is good for the health of consumers (Nigerians and businesses).

However, like any other businessperson, Titi is asking for payment of the akara she has supplied and has not been paid for. Mama Jubril (NBET) is blaming the Customers (DisCos) she supplied the akaras to, the Customers on their part (DisCos) are blaming their Consumers (Nigerians, Businesses and Government Offices), Consumers are insisting they are paying for every akara (Electricity) consumed by them. They are dribbling Titi here and there whilst the Consumers are also blaming her for not producing enough akara!
Ogaji is the Executive Secretary, Association of Power Generation Companies

Titi does not have any direct contract/agreement with Mama Jubril’s customers (DisCos) and should certainly not intrude or be affected by how Mama Jubril decides to sell the akaras she gets from her as she has a wholesale agreement (PPA) with her.

Titi’s business is now going down because she is not able to continue getting loans from the bank to sustain a business where the banks cannot get their interest and/or capital. Titi is finding it almost impossible to keep buying all the ingredients she needs for the Akara business, including the kerosene and firewood. Also, Titi is finding it hard to keep her salary commitment to the well- trained boys and girls who have been working very hard to keep her business going. Prizes of things have all doubled, yet her price is same, all she asks is full payment of the outstanding.
Ogaji is the Executive Secretary, Association of Power Generation Companies

If you are Titi (GenCos), can you continue to produce more akara (electricity)? Knowing you will not be paid in full? Can you increase the number of akara (Increase Electricity Generation)? Knowing that even the driver (transmission) cannot deliver (transmit) the quantity you are producing? How can you even manage the bank loans, the worker’s salary? Who takes responsibility for the rejected akara (rejected electricity) since Titi cannot store it (considering power cannot be stored)? Who pays for the kerosene and firewood (gas and other materials used in generating) used to prepare the akaras? Should Titi continue to sell the akara (electricity) to Mama Jubril knowing she is incapable of paying for them? How best can Titi transport her akara to Mama Jubril since Mr Okafor is the only transporter of akara in Nigeria? Since Mr Okafor’s truck is faulty and may not be fixed anytime soon, do you advise Titi to increase her production?
This is the summary of the problems in the Nigerian Electricity Market. Nigerians are very intelligent people, they should decide for themselves, the solution to this conundrum.

Ogaji is the Executive Secretary, Association of Power Generation Companies

In this article:

  • femi

    God Bless you
    Who put this contraption together the only people smilling are the discos who are going to akara seller buying 1000 akara every month and paying for 200 with no questions asked only when questions started being asked quickly rushed to an indicted corrupt official to get an injunction so that he can continue buying akara freely knowing well the federal government will have to ultimately pay for these akaras
    Authority stealing in another form

  • ade

    Can each state, or a group pf states in Nigeria, come together, to produce,distribute and maintain their own power supply needs, and have the Federal Power Suppy (PHCN) as a back up or abandon it totallu? If each sate is empowered to have its own Uninterrupted Power Supply generation, from whatever source, I think this will solve the problem of power supply in the country. For example, 1 or 2 states may decide that, based on their natural resources like water bodies, they can go into Hydroelectric Power dams, or a very sunny area like the North of Nigeria, 2 or 3 stares can come together to harness their sun power into Solar, and directly be responsible, and maintain it for their few states. In windy areas of the country, 1 or 2 states can also come together to build wind turbines to power their energy needs. Many times, a huge problem can be solved effectively, if broken down to small parts of a whole! As an analogy:” a ship is a huge mechanical creation, but is made up of small parts, put together that led to a large ship. We are tired of No NEPA, no PHCN!!!!!! The economy is really affected by poor power supply. Right now my generator is on and I just came back from the local barber, who cut my hair by putting on a generator.

    • femi

      It is possible but so many legal obstacles will make it impracticable the DISCOS that own the Distribution lines have been given away for 20 years so they will take Government to courts local and international and as long as you have litigation no investors will come , you cant build new distribution links for the same reasons . Even when you want to generate power in an estate they go to court an example is banana estate. As long as there are litigations no investor will come

      • ade

        Hi, thank you for your educating reply, and I understand all from your reply. The power of democracy must come to play at this point. Let us not vote in the government that sold distribution lines to companies (DISCOS) and generating companies (GENCOs), that have not performed over a period of 2 years +, after the sale. We must hold Govt. accountable for this non performance. Its either they, govt, solve the problem of power generating and supply, or they get booted out. Enough is enough! So many people complain about the noise from these myriads of generators. Mine is overworked and some have conked out from overuse! There has to be a solution! Failure of power supply must be one KEY reason not to revote a governement again, and give another set of people a try in effective governance and problem solving. Its too much suffering!

    • ewucanbeer

      If your generator is on, then you are the producer, distributor and consumer! So you should have no problems. What is your complaint?
      You have no power, because you are not willing to pay 25,000 Naira a month for a three bedroom flat.
      That! is what it costs to get 24 hour power supply. Take it or leave it.

  • real

    This is a funny yet good way to put the problem of Nigeria electricity sector. The core problem stems from the power sector model that the government has implemented. It allows for blame games and no responsibility, which means it would never be improved and it is geared toward looting Nigerian’s and wasting money. The best model to adapt is to allow the generating companies to generate, transmit and distribute. This would improve the power sector greatly and quickly because that company would be in control of everything and would also compete greatly to ensure their consumer are serviced with their area of operation. No other model would work in Nigeria because of the corruption, greed and blame game.

    • ade

      Thanks for your brilliant response and I wonder why Nigerians keep on tolerating non performance year in year out! Enough is enough! If at the end of 4 years, APC government cannot provide us with stable power supply, the electorate (we Nigerians), should try to change the government! I am not PDP, just a regular “Joe”, suffering from bad government.