The Federal Government’s allegation that electricity distribution and transmission firms are not leaving up to expectation has again reopened the issue of non-performance of investors. Stakeholders, however, argue that the challenges are more than meet the eye. They say the problems, which are encompassing affect operators in the value chain, writes AKINOLA AJIBADE.

The recent pronouncement by the Minister of Power, Saleh Mamman, that poor distribution and transmission mechanisms are central to the problems of the electricity, may have revealed the gory state of the sector, which was privatised by the Federal Government in 2013.

Not only has the statement, made last week in Abuja and which the Minister promised to relay to the Presidency, has revealed the dismal growth of the sector, it has to, a greater extent, shown that the industry is yet to provide stable power six years after it was sold to private investors.

In fact, statistics reeled out by Mamman, lent credence to this assertion. According to him, the sector generates 13,000 megawatts (Mw) of electricity, while its transmission capacity is 7,500Mw.

Of this, the Minister said only 3,500Mw is distributed to more than 200 million Nigerians, a figure, which many observers believe, is too insufficient to meet the needs of the economy.

Prior to this period, the government has tried to re-invigorate the sector by providing it with funds and other assistance. In recent times, the Federal Government has bailed out the sector with N700 billion.

Besides, the investors who bought the assets of the defunct Power Holding Company of Nigeria (PHCN) have offered some financial and technical assistance to the sector.

Read Also: Power sector loss hits N1.7trillion

Records show that the management of Egbin Power Plant has invested substantially in the plant to improve its performance. Others have invested in those power assets bought during the privatisation.

All these pale into insignificance as the sector is unable to provide stable electricity to Nigerians, a development, which made many to conclude that the industry is far from recording growth.

Sector’s problems

According to the Chief Executive Officer, Change Partners International, Mr Akachukwu Okafor, the problems are not limited to a particular segment. In an interview with The Nation on phone, he said the problems were multi-dimensional.

Okafor said: “It is believed that gas is the main problem. I can tell you that there are many problems; these are multi-dimensional.

“The most important challenge facing the sector is not only generation. There are other problems, such as transmission, distribution, metering, energy theft, and poor revenue caused by the unwillingness of consumers to pay for energy used.”

He said the inability by the Nigerian Electricity Regulatory Commission (NERC) to  make provisions for laws in the sector, and the government’s interference, among others, have stalled the growth of the sector.

The Managing Director, Power Cam Nigeria Limited, Mr Jide Ogunleye, toed a similar line, saying that it is difficult to link the problems in the sector to an agency or institution. He said every operator in the value chain shares in the problems.

“Whether generation, transmission, distribution, metering, or power facility assembling, the problems affect every sphere or facet of the sector. No agency can be isolated from the crises facing the industry,” he added.

DisCos’ opinions

The Director of Research and Advocacy, Association of Electricity Distribution Companies (ANED), Sunday Oduntan, said it was wrong to blame the power distribution firms for the lapses in the sector.

He said other operators were also guilty. He noted that the power generation companies (GenCos), Nigeria Bulk Electricity Trading Company (NBET), Transmission Company of Nigeria (TCN), among others,  share in the blame.

“How can you explain a situation where the power generation companies do not have enough gas? How can you explain a situation where the transmission companies transmit only part of the energies?

How can you explain a situation in which the power distribution firms are unable to distribute enough electricity to the consumers? They can only supply few volumes at their disposal to the consumers,” he said.

Oduntan said issues, such as N500billion, which the Federal Government claimed to have paid the firms, debt free balance sheet, payment of the debts owed the firms by Ministries, Departments and Agencies (MDAs), among others, were not achieved, and as such, limits the growth.

He noted that the inflation rates were as high as 17 per cent for three years, coupled with the fact that the sector’s generation averaged 3,500Mw in the past few years.

Electricity tariffs, Oduntan said, is not cost-reflective due to the fact that consumers are not paying the right cost of the electricity they are consuming.

More worrisome is that Oduntan said the government does not deem it fit to adjust the tariffs, until early this year, when it announced plans to review them.

The problems, Oduntan said, had resulted in AT&C losses of over 50 per cent, stressing that power distribution firms had tried to minimise losses despite the challenges.

GenCos

The Executive Director, Association of Power Generation Companies (APGC), Dr Joy Ogaji, said the firms were battling huge cost of production, a development, which according to her, is affecting generation. She said the government had imposed administrative charges on the firms.

This, Ogaji said, coupled with the decision of the government to implement the Value Added Tax (VAT) of 7.5 per cent, which she claimed would have a far-reaching consequences on the sector.

The Director, Centre for Energy Studies, University of Port Harcourt, Prof Wunmi Iledare, said the administrative charges imposed on the activities of the power generation firms would affect their returns on investment.

Iledare said: “It is additional charges, which would affect their returns on investment. Already, GenCos are having problems with gas. The firms are not getting the product as at when due. And when the firms get the product, they get it at a higher cost. This is affecting the performance of the GenCos.”

By Emeka Ugwuanyi

Investors have urged the Federal Government to review some of the policies in oil and gas industry to enhance the ease of doing business.

According to the investors, bureaucratic processes undergone to secure and implement a project in the industry are unhealthy for business transactions, adding that the things investors pay for have increased significantly.

The things include meeting the conditions NipeX have put in place to getting licences from the Department of Petroleum Resources (DPR) and paying for safety and standards.

NipeX is Nigerian Petroleum Exchange, an electronic one-stop transaction centre created to improves on value procurement in the oil and gas industry and institutionalise world-class contracting processes in Nigeria. NipeX is a Division of National Petroleum Investment Management Services (NAPIMS), an arm of the Nigerian National Petroleum Corporation (NNPC).

The investors, who spoke at a panel, during the just-held Nigeria International Petroleum Summit (NIPS) in Abuja, noted that policies that hamper inflow of investments and fast-tracked implementation of projects need to be reviewed and streamed lined. They said investors pay for many things, yet there are no businesses.

Read Also: Strengthening the ease of doing business in Nigeria

They advised the government to review some policies so that the factors militating against ease of doing business in oil and gas industry would be eliminated.

According to the Group Managing Director, BRADE Group, Ese Avanoma, one of the investors that spoke to The Nation on the sidelines of the Nigeria International Petroleum Summit (NIPS), “local content needs to be further strengthened and supported, policies in the oil and gas industry that give room to duplication of roles and payments should be reviewed by the government for the purpose of ease of doing business.

He said the government must see how to reduce the red tapes in the industry, which have really increased.

Avanoma, who said his six companies that operate across Nigeria, Ghana and Uganda, among others, said drilling of oil and gas wells are core areas of his firm’s operations and they do drilling and completion  in these countries.

His companies also deal on heavy duty equipment used for oil pipes and line pipes. The group is looking at introducing a new technology in the industry that would reduce the cost of crude oil production, he said, adding that most recently, his company veered into the production of chemicals.

He said: “We are into drilling and completion of oil and gas well, heavy equipment to service the oil industry, manufacture of chemicals and new technology adaptation in Nigeria. As you must have noticed, the oil and industry has undergone major review in the past few years, which have negative and positive impacts. Cost is one of the major drivers, we use to have a barrel of crude oil costing $100, and today it cannot be anywhere higher than $60 per barrel. We will bring in new technologies and adapt them to the Nigeria environment to see how they can reduce the cost of producing a barrel of oil here.”

To him, the cost of producing oil is so high in the country, therefore, such new technologies will change the way things are done traditionally for better results.

States must have a say in how investment in the mining sector is conducted. But for this to happen, there must be a harmonised legal framework between the federal and state governments to create a robust climate for investment flow, reports AMBROSE NNAJI. 

Collaboration between the federal and state governments will be beneficial to creating an investment climate. This synergy is inevitable because the mining communities are in the states just like the mining sites. There is no mining site that is located outside the states or local governments.

To this extent, industry stakeholders said states must have a say in how investment in the sector are steered. But, the Nigerian Minerals and Mining Act doesn’t allow direct investments from state governments without collaboration with the Federal Government.

The Nigerian Minerals and Mining Act 2007 repealed the Minerals and Mining Act. It regulates the exploration and exploitation of solid materials. The Act confers control of properties and minerals in the state and prohibits unauthorised exploration or exploitation. It says any land where mineral has been found in commercial quantities shall be acquired by the Federal Government in accordance with the Land Use Act. Property in mineral resources shall pass from the government to the person by whom the mineral resources are won, upon their recovery in accordance with provisions of the Act, among other things.

The Director of Communications and Advocacy, Nigeria Extractive Industries Transparency Initiatives (NEITI), Dr. Orji Ogbonnaya Orji, agreed it was the grey area the states and the Federal governments needed to harmonise to make room for favourable investment flow.

NEITI, he said, has urged the federal, state and local governments to shift attention from oil and look at the solid mineral sector, adding that the potential in the solid mineral sector is huge.

Orji recalled that a roadmap had been developed by the Ministry of Mines and Steel Development, which NEITI also made input. According to him, the roadmap looks very attractive to investors, the government and the citizens, adding that what’s required is the political will and collaboration from all tiers of government to implement the roadmap.

“In the implementation, if there are bottlenecks that needed to be removed, it would not be difficult to be done but except we engage in the process and reduce this tendency to think that oil will solve all our problems, we will continue to make very little progress,” he insisted.

Orji, who spoke with The Nation on telephone, noted the law invested ownership of mineral resources on the Federal Government. However, it didn’t say the states cannot invest in mineral resources. According to him, it only requires the states to find a way to engage with the Federal Government and leverage the fact that the resources are in their domain.

He, nonetheless, recalled that some states were considering that. According to him, the government of Taraba State has spoken on how the state was looking at collaborating with the Federal Government.

Again, at the last economic summit held by the Southwestern states, they also made some decisions to discuss with the Federal Government on how it can cede some of its powers to enable the states come in to invest.

Orji stated that an investor goes to the Federal Government to get mining licence, and yet return to the state where the minerals are located. He insisted something must be done about this process in terms of legislation to make for free and easy flow of investments.

“We are not saying the Federal Government should not control that. What we are saying is that the states should not think that because Mining and Mineral Act is invested in the Federal Government, they have no stake in it. They have and they can engage with the Federal Government and see how they can partner  to allow for free flow of investments in the sector,” he said, adding that even states could invest in mining but they couldn’t do that in isolation without the Federal Ministry of Mines and Steel Development.

On why the collaboration is lacking between federal and state governments, Orji said: “It was also part of the ongoing campaign for us to look beyond oil. When some states know they can go to the Federal Government and get a share of the oil revenue, why do they have to border to diversify their investment. As long as we continue to depend on oil and ignore to do something creative by looking elsewhere, including solid minerals sector, we will continue to have problems.

“Because investment in mining is capital intensive and it does not yield money immediately, it needs a gestation period before the money can start coming. But any state can take that bold step, that’s what NEITI is emphasising – diversification of the economy. It has to be a continuous investment in the mining sector from one administration in the state to another up to an effective period of time.

“If you are investing in coal, gold mining, it’s not something that you will put in money today and expect returns on investment soon. Sometimes, you require investment in that sector up to 10-20 years, and when the investment stabilises, generation to generation will reap from it.”

‘’There are states that can survive on other services, tourism and sports, among others, but for the fact that they are sure that every month allocations will come from oil, why do they have to bother? Two or more states or even as a zone, can raise funds and invest in the solid mineral sector in their states, working in partnership with the federal agencies. Such agencies include the Mining Cadastral office, the Mining Inspectorate Division (MID), the Federal Mines and Steel Development, the Geological Survey – they are all there to provide the leadership where necessary, but except you make that fundamental step, nothing happens,’’ he said.

The survey conducted by NEITI shows that every state has one form of mineral deposit or the other. Therefore, they have to seek ways they can partner with the Federal Government to leverage their minerals. But in all these, it’s important we create the atmosphere that will attract investors. One of them is infrastructure, good roads, water, stable power supply and security. When all these are in place, it will become attractive to investors, he added.

Director, Solid Minerals Development Company, Taraba State, Matsai David Angye, also called for synergy between the federal and state governments to move the sector forward. “When the federal, states and local governments work hand in hand and synergise, investments will come,” he said, adding there are more to be discovered in the sector.

Angye urged the Federal Government to address the issue of insecurity, noting that mining is capital intensive and as such, it needed a peaceful environment to operate. He advised the government to consider giving the states or relevant organs in the states a free hand, adding that there are some policies of government at the federal level that hinder investors coming in.

“If there’s a synergy and understanding between the federal and state governments, it will increase productivity and even the willingness. But by the time you direct everything from the federal, which most times the states are not even aware of what’s happening, when the investors come to the states, it’s not what they think, they see on ground, they will always have stiff confrontation with the states.”

“But by the time there’s an understanding in the policy that favours the state and the locals, we will go hand in hand, that’s the clause the states don’t find comfortable. All over the states of the federation, we don’t find that exclusive right comfortable, the states should have a say,” he insisted.