‘Some Successful Bidders In The Power Sector Lack The Expertise’
WHY is the country still experiencing persistent epileptic power supply two years after the privatization of the sector? Although President Jonathan’s administration has made some strides in power sector reform, it is aphoristic that power supply since the sector’s reform has worsened.
The epileptic power supply since privatization resulted from problems traced to the different segments of the sector namely; Generation, Transmission and Distribution.
The total installed capacity of the currently generating plants in Nigeria is 10,390 MW with available capacity less than 6056 MW, but power generation has been below 4500 MW. The question now is why? For a start, seven of the twenty-three generation stations are over 20 years old and the average daily power generation is lower than the peak forecast for the current existing infrastructure.
Some of the companies that took over from PHCN have difficulties raising funds to maintain obsolete equipment and run these plants. Investigative reports by some entities indicates that a visit to some of these generating plants shows systematic failures bordering on gas shortages, poor maintenance or lack of it, poor water management.
It is obvious, therefore, that the persistent crisis in the nation’s power sector is largely traceable to human factor – poor maintenance, corruption, inadequate planning and funding. Furthermore, the power sector is inextricably linked to Nigeria’s vast gas reserve.
Theft and vandalism remains a major problem and have resulted to lost gas and a lack of feedstock for new gas powered plants – major supply of power generation in Nigeria.
The transmission segment is the weakest link in Nigeria’s electricity network. Lack of effective transmission infrastructure is at the root of the national grid’s stranded capacity. Large-scale investments are needed in order to meet expectations of both supply and demand.
While the appointment of a contractor for the Transmission Company of Nigeria is definitely a step in the right direction, the Government needs to ensure support for a rapid infrastructure improvement. The distribution companies who are responsible for maintaining an adequate and safe supply to consumers are obviously bedeviled with weak and overloaded distribution network.
Their inability to meet an increasing demand is in part due to network issues including frequent overloads, fluctuations, undersized conductors, lack of maintenance and repairs following vandalism.
Most importantly, the bidding timeline for the privatized infrastructures was too short for prospective bidders to appreciate the unpredictability and volatility of the Nigerian economic framework. Consequently, International lenders distanced themselves from the privatization process out of concern.
As a result, local banks provided close to 70% of the funds required to pay the purchase price for the distribution and generating companies. With shortage of international lenders participation to refinance and syndicate these loans, it is now clear why successful local bidders are having problems financing the capital requirements to build sustainable and viable generating and distribution facilities.
Finally, some of the successful bidders lacked the technical knowhow and financial wherewithal to run these facilities.
As stated earlier because of the timeline of the bidding process experienced and foreign investors were shut out of the process.
Some of these successful bidders failed to carry out due diligence, consequently did not know what they are getting into. It is also alleged that some government officials sold some of these companies to themselves and cronies.
Does it mean that nothing could be done in interim to arrest the situation especially now that the country is experiencing fuel scarcity? I don’t think President Jonathan’s administration which is a lame duck now can do anything in less than two weeks to its end.
We should wait for the Buhari’s administration to take some proactive steps to correct this problem. Many electricity workers have called on the incoming government to review the power sector privatization. Do you agree? I don’t know the extent of the review they are calling for.
I will agree with a partial review. If they are calling for the incoming government to look at reverting to the PHNC era, I will beg to differ. The electricity workers have been paid off and the companies sold to private entities.
I want the Buhari’s administration to look into the issue of gas supply and the allegation of government officials selling to themselves. Also, benchmarks should be set for current owners. Failure to meet reasonable target should lead to forfeiture of license to operate.
Establishing an independent antitrust regulator should be a priority – to oversee pricing and anti-competition issues and enforce demand and supply indices.
The bidding and award processes should be looked into- free of any allegation of graft or political influence.