The Nation Newspaper

Category: Industry

  • Lagos Chamber trains 800 entrepreneurs in three years

    Lagos Chamber trains 800 entrepreneurs in three years

    The Lagos Chamber of Commerce and Industry (LCCI)  has trained no fewer than 800 entrepreneurs in the last three years, its Director, Research, Advocacy and Entrepreneurial Development, Dr. Vincent Nwani, has said.

    Speaking at the workshop on “Practical Writing Business Plan and Feasibility Study”, organised by the LCCI, in Lagos, Nwani said they were trained under its entrepreneurship development programme

    He noted that the focus of the workshop was to teach businessmen how to develop and write good business plans that would promote their successes.

    He added that it was a platform to give to the society and promote commerce and industry, while shrtening the skill gap in the industrial and corporate environments.

    His words: “It’s a programme where people who love skill come to acquire it by attending training programmes free. Within the last three years, the German Government has been funding this, and it’s going to terminate by the end of 2017, where LCCI should be able to take up from there. And in the last years, we have trained almost 800 entrepreneur graduates who are doing well in their various businesses.”

    Nwani explained that the motive was to address the lack of finance or capital. “The last aspect of the programme was monitoring business clinic. They are writing their ebusiness to us and we will follow them up and help them write their business plan – give them suggestion, data, and help them do market survey free, so that they can  put down this business plan, and also defend it,” he said.

    One of the trainers, Mrs. Fayo Williams, stressed that one of the challenges faced by young entrepreneurs was lack of proper documentation of data. She attributed this to some cultural practices.

    Williams noted that another challenge was lack of good packaging for their business plans to access funds from investors. She added that most entrepreneurs don’t understand how to craft their business plans in such a way that it will gain the interest of an investor.

    “We have a culture that tells you that everything is in the hands of God, which is true. But in the space of entrepreneurship, there is a procedure for finding out information, conducting market research, and then being able to make a good forecast,” he added.

  • ConMin West Africa exhibition gets new date

    The ConMin West Africa Exhibition and the National Mining Summit planned for April have been shifted to June 13 to15.

    According to its organisers, the planned closure of Abuja Airport  next month necessitated the postponement. It said with the huge number of expected attendees and speakers, who would be travelling from Lagos and abroad, the event could not hold without the airport.

    In a statement, Jamie Pearson of Afrocet Montgomery, the organisers, said ConMin West Africa was aimed at serving the rapidly-growing construction machinery and mining industries in West Africa. ”It is organised by Afrocet Montgomery, which runs Africa’s largest mining show, Electra Mining’ in Johannesburg. The event is rnning with full endorsement from the Ministry of Solid Minerals, Deloitte and IMAG, which owns the global construction brand “Bauma”,” he said.

    He added that the event, billed to hold at the International Conference Centre in Abuja, would act as a platform for stakeholders to discuss business prospects and display leading technologies and equipment in the construction and mining sectors.

    He said the event could attract over 150 firms and 3,000 visitors from the West African sub-region.

    The National Mining Summit, which runs alongside the exhibition, he said, would see top-level participants from the government and the country’s mining industry converge on the federal capital.

  • Forex ban on 41 items stays, says CBN

    Forex ban on 41 items stays, says CBN

    The Central Bank of Nigeria (CBN) has rejected calls by the Organised Private Sector (OPS) to reverse its foreign exchange (forex) ban on 41 goods, which the country can produce.

    The CBN said it would continue to support the real sector rather than lift the ban.

    CBN’s Acting Director, Corporate Communications, Mr. Isaac Okoroafor, said despite criticisms, CBN would not drop the policy nor bow to  “self-serving” interests.

    “We have observed with great concern the continued and unwarranted attack on our policies by a group of Nigerians, whose real interests, findings have shown, are anything near altruistic, but rather self-serving and unpatriotic,” Okoroafor said.

    He said while the CBN respected Nigerians’ or stakeholders’ views, it found it curious that some interests have remained persistent in misinforming the public, with the aim of discrediting the genuine management of the economy.

    Okoroafor said this could create  distrust and panic within the financial system. “Indeed, self-centered individuals, who have failed to assail our patriotic position, have resorted to the sponsorship of serial propaganda to misinform and mislead the public on the objectives of our policies,” he said.

    He said some unpatriotic elements were pushing for a reversal of the policy aimed at conserving forex, stimulating agriculture and manufacturing, and promoting exports.

    Okoroafor blamed the economic challenges on the past practice of frittering away huge oil earnings.

    “Our decisions on forex management are prompted by the challenge posed by the level of depletion of the country’s reserves, arising from issues, such as drastic reduction in oil earnings, speculative attacks and round tripping,” he explained.

    According to him, the pressure on the foreign reserves has persisted due to huge reduction in monthly foreign earnings, which fell from over $3.2 billion monthly in 2013 to below $500 million last year, when the demand for the US dollar, particularly by importers, continued to rise.

    Despite the challenges, the CBN has continued to ensure that there is liquidity and transparency in the forex market, while checking inflation, and promoting productivity in critical sectors of the economy, Okoroafor said.

    However, the Organised Private Sector (OPS) members are not swayed by CBN’s position. Describing the policy as worrisome, they insisted that the apex bank’s unorthodox forex allocation system would continue to hamper  growth.

    The Lagos Chamber of Commerce and Industry (LCCI) Direc-tor-General, Mr. Muda Yusuf, said, in Lagos, that it was worrisome that the CBN had remained silent on some forex-related issues that were affecting the economy.

    He listed them to include acute illiquidity,  inflow impediments and too tight regulations on movement of funds.

    Others, he said, were the effects of the forex policy on non-oil exports, its disincentive to foreign direct investments and the negative impact of the policy on portfolio inflows.

    “Others are adverse effects on remittances by airlines, foreign investors’ dividends and profits; adverse effects on Diaspora remittances and the effects on investors’ confidence,” Yusuf said.

  • UNIDO to hold summit

    The United Nations Industrial Development Organisation (UNIDO) has concluded arrangements to hold the ‘Global Manufacturing and Industrialisation Summit (GMIS) aimed at promoting a roadmap for industrial development to echo the evolution in international trade and global best practices.

    The summit, which holds in Abu Dhabi, United Arab Emirates (UAE), March 27-30, is a joint initiative launched by UNIDO and the Ministry of Economy of the UAE.

    As the world’s first-ever cross-industry forum, the summit is designed to create universal consensus by unifying governments, businesses and civil society to take a transformational approach towards shaping the future of manufacturing.

    A statement on UNIDO’s website stated that manufacturers play a crucial role in the exponentially evolving world economy, accounting for almost 17 per cent of global Gross Domestic Product (GDP) over the past few years.

    “They (manufacturers) generate wealth for investors, pay taxes to governments and employ half a billion people worldwide. In the meantime, they are also facing challenges brought by rapid transformations in technology and global value chains that are driven by the digital revolution. These challenges can no longer be resolved in isolation, they require a global solution,” the statement said.

    It added that in this context, GMIS will offer a voice and a venue for leaders to transform manufacturing, encourage greater investment in capabilities, foster innovation and drive global skills development.

    “The summit will bring together over 1, 200 delegates, including visionary world leaders, industry CEOs, research experts and academics to provide long-term innovative solutions to the challenges faced by the manufacturing industry,” the statement added.

    It also said in line with the Sustainable Development Goals (SDGs) of the United Nations, the event is part of a global initiative to promote and advance inclusive and sustainable industrial development, for which this year’s is only the beginning of the GMIS journey.

  • Weighing the options for infrastructure financing

    Weighing the options for infrastructure financing

    To reduce the $300 billion infrastructure deficit and unlock the real sector’s potential to reflate the economy, Nigeria needs about $25billion yearly, according to experts. But the government’s attempts to find the cash to build infrastructure through external borrowing or the N6 trillion pension funds, among other options, are embroiled in controversies, provoking fears that some projects will either be delayed or abandoned them. This has cast doubts over the sector’s capacity to haul the economy out of recession. Assistant Editor CHIKODI OKEREOCHA reports.

    Vice President Yemi Osinbajo has never stopped declaring his confidence that the economy would bounce back. At local and international fora, he spoke of the Buhari administration’s commitment to pulling the economy out of recession, hinging his optimism on massive investment in infrastructure.

    For instance, at the World Economic Forum in Davos, Switzerland, Osinbajo said: ‘’The Muhammadu Buhari administration is committed to investing more in infrastructure than in previous times by ensuring that 30 per cent of the budget goes into capital expenditure”.

    The vice-president, who chairs the Economic Management Team (EMT), said the government was working on how to tap into the N6 trillion pension fund to finance infrastructure development. He added that there was a need to de-risk such financing models for infrastructure.

    However, his belief that the economy would rebound appears to vary with the anxiety among operators in various sectors, particularly the real sector.

    Operators in the real sector, which comprises manufacturing and agriculture, are apprehensive of delays or abandonment of infrastructure projects planned for this year, following the controversies over various government’s infrastructure financing options.

    Last December President Buhari presented this year budget of N7.3 trillion to a joint session of the National Assembly. Christened “Budget of Recovery and Growth”, he said on expenditure, the government proposed a budget of N7.298 trillion, a nominal 20.4 per cent increase over last year’s estimates.

    According to him, 30.7 per cent of the expenditure will be capital in line with the government’s determination to reflate and get the economy out of the woods as quickly as possible.

    The fiscal plan, he also said, would result in a deficit of N2.36 trillion for the year, which is about 2.18 per cent of GDP.  The deficit, he said, would be financed mainly by borrowing, which is projected to be about N2.32 trillion.

    However, despite the 30 per cent allocation to capital expenditure, the Federal Government appears to be at the crossroads on how to generate enough revenue to meet its obligations, especially capital projects.

    This is so because its attempts to turn to international financial institutions for loans to finance critical projects have been rebuffed by those critical of the administration’s economic policies.

    Last October, Buhari requested the National Assembly to okay a foreign loan of $29.9 billion to execute key projects across the country. But the request died on arrival. It was thrown out by the Senate for lacking a borrowing plan.

    The move also did not go down well with experts and Nigerians. Many of them kicked, insisting that borrowing would do the country more harm than good. Renowned economist and industrialist Henry Boyo was one of them. He said the $29.9 billion loan would affect Nigeria.

    Boyo noted that though there was nothing wrong in borrowing to improve social welfare and infrastructure, it was improper for the government to borrow when it owed so much that it was using about 40 per cent or more of its real income to service debts.

    The economist also expressed concern over the government’s plan to borrow to build infrastructure given that the government-funded infrastructure had never been well managed.

    He said with the sad record of poor performance of government agencies and institutions, it was worrisome for anybody to suggest borrowing to create more infrastructure that would be managed by government.

    Human rights lawyer Mr. Femi Falana (SAN) cautioned the government against taking the loan. Rather than go aborrowing, he called on the government to adopt an “aggressive policy” to recover looted funds.

    Insisting that the government’s request for loans would be detrimental to the country’s future, he said there was a need to fight those who stole Nigeria’s money.

    The Chairman, Senate Committee on Land Transport, Gbenga Ashafa, agreed with him. While urging Buhari to fund the 2017 budget deficit with recovered fund by the anti-graft agency, he appealed to the government to ensure 100 per cent funding of infrastructure.

    Such appositions may have put the government on the spot over how to close the nation’s huge infrastructure deficit, which, according to the African Development Bank (AfDB), is estimated at $300 billion. The Minister of Finance, Mrs. Kemi Adeosun, said about $25 billion is needed yearly to meet the country’s infrastructure deficit.

     

    Row over use of pension funds

    Apart from borrowing, the Federal Government is also considering turning to the nation’s pension funds to building infrastructure. The Nation learnt that as at last November, the fund had risen to a staggering N6.02 trillion.

    With the National Pension Commission (PenCom) projecting that the country’s total pension asset may hit N20 trillion by 2020, it is surprising that the government, according to Osinbajo, was working on how to tap into this huge fund to finance infrastructure development.

    Again, this option appears not to be enjoying a smooth sail. For instance, the Trade Union Congress of Nigeria (TUC) condemned comments by some federal lawmakers that the accumulated pension funds should be deployed for infrastructure development.

    TUC President Comrade Bobboi Kaigama said the pension scheme was informed by the need to tackle the difficulties being faced by retirees and not to raise money for any infrastructure or investment being pushed by the rich.

    He argued that infrastructural development remains the duty of the government and that it is a key driver and a critical enabler of sustainable growth all over the world. According to him, it provides a unique avenue for the public and private sectors of the economy to thrive. It is also critical in attracting foreign investors.

    Kaigama said rather than appropriating the monies saved from workers’ contributions to perform the government’s responsibility to fix roads, provide electricity and other social infrastructure, the funds should be utilised in projects that are of direct benefit to the retirees and other workers, such as fixing the housing deficit.

    He said this must be done with rules for proper accountability in place.

    Perhaps, to douse the tension over whether or not the government should fall back on the pension fund, PenCom Director-General Mrs. Chinelo Anohu-Amazu clarified that there was need for the government to provide adequate guarantees to secure investment of the fund in infrastructure.

    Speaking at the African Pension Awards, organised as part of activities marking the 2016 World Pension Summit, she said while the Commission was not opposed to the idea of deploying the pension fund for infrastructure, adequate mechanism must be put in place to ensure its safety.

    Mrs Anohu-Amazu, however, explained that pension funds alone would not address the infrastructure needs of the country, adding that other sources of funding, such as Public-Private Partnership (PPP) arrangements, should be explored.

     

    Govt sticks to its gun, despite opposition

    Despite the opposition against taking the loan, the Federal Government has refused to budge, insisting that it has no choice, but to borrow.

    The Minister of Finance, Mrs. Kemi Adeosun, said the government’s inability to generate enough revenue to meet its obligations had left it with no choice than to turn to international financial institutions for loans to finance critical infrastructure projects.

    According to her, the government has a huge monthly personnel expenditure of about N210 billion, with more debt service burden of N120 billion. This, she said, translates to a total of N330 billion monthly.

    Adeosun said it had, therefore, become difficult with the low receipts from oil to generate enough revenue to meet these obligations as well as fund capital projects. She insisted that realities on the ground made it imperative for the country to get the loan, if it must survive the economic crisis.

    While pointing out that it would be futile to wait for oil price to rebound, as the prediction is that it will not go back to $110 per barrel soon, the Minister said Nigeria has no choice but to look for low-cost funds and put infrastructure in place, “because it is the infrastructure that will unlock the economy”.

    The Minister has an ally in Dr. Alaba Olusemore, an economist, who said the $29.9 billion external loan being sought by Buhari would help stimulate the economy and also create jobs. Olusemore, a Managing Consultant, Nesbet Consulting, a Lagos-based firm of management and finance consultancy, said he expects the Green Chamber to okay the loan once the executive furnishes it with the loan’s  breakdown.

    “I expect the Senators to approve the loan request as soon as President Buhari resubmits it with the necessary documents and borrowing plan, because at a time like this when the economy is in a recession, there is need for a stimulus to execute capital projects and create employments,” Olusemore told The Nation,

    The loan management expert and Fellow, Chartered Institute of Bankers of Nigeria (CIBN), said: “Capital projects are not divisible. You need a bulk sum to finance capital projects”. Besides, capital projects, he said, are easier to monitor than recurrent expenditures since the multilateral development agency advancing the loan do on-sight and off-sight monitoring to ensure such loan is applied for intended purposes.’’

    Pointing out that multilateral development agencies have affiliates in the country to monitor the deployment of loans for capital projects, Olusemore said there was no cause for alarm over perceived fear that the loan may not be properly applied or misapplied.

    He said because of its anti-corruption drive, the Buhari administration has put itself on self-censorship, which ensures that funds, whether corporate credit or sovereign loans are not diverted but deployed for intended purposes.

     

    Real sector operators fret

    The vice president’s confidence over prospects of salvaging the economy through aggressive investment in infrastructure gladdened many real sector operators. Their hope was that their productivity, competitiveness and profitability, which have been eroded by dearth of infrastructure, would receive a major boost this year.

    However, with the stalemate over how to fund infrastructure projects, operators are at a loss over how the expected boost in their productivity would come. Some of them who spoke with The Nation, said the hope of riding on the sector’s back to pull the economy out of recession might not be realised, if infrastructure projects are delayed or abandoned.

    For instance, the former Director-General, Nigeria Textile Manufacturers Association (NTMAN), Mr. Jayeola Olarenwaju, said infrastructure deficit,particularly poor electricity supply remained one of the stumbling blocks to the country’s road to economic growth and development.

    He said improving power supply and addressing other infrastructure challenges was holding the sector down. He lsited these problems as poor road and rail network, lack of portable drinking water, and affordable housing.

    He said funding options remained the only way to unlock the sector’s productivity, improve business competitiveness and create employments.

  • BoI offers Aba manufacturers loan tips

    BoI offers Aba manufacturers loan tips

    The Bank of Industry (BoI) has offered tips to Aba-based manufacturers on ways to secure its facilities to expand their businesses.

    BoI’s Acting Managing Director Mr. Waheed Olagunju coordinated  the National Micro, Small and Medium Enterprise clinics for viable enterprises, organised by the Federal Government in collaboration with the Abia State Government.

    Vice President Yemi Osinbajo opened the event, which had various Federal Government agencies involved in economic development interacting with Aba traders with the aim of growing and supporting their businesses.

    Olagunju noted that to easily access a loan, a business owner must imbibe some cardinal virtues, such as character, capacity, and commitment. He added that skills, requisite knowledge, and responsibility are needed to ensure that the person is committed to the business.

    Identifying collateral as a major constraint to accessing loans by most businessmen, Olagunju noted that the government had taken steps to make businesses viable by providing relevant tips to break the barriers of difficulties faced by some in accessing loans.

    “The first aim starts with marketing, how do manufacturers market their businesses? Hence the government has been coming up with procurement policies that are in favour of Small and Medium Enterprises (SMEs),” he said.

    Noting that this had been done in other parts of the world, the BoI chief said: “We are evolving the same thing in Nigeria so that the government patronise MSMSEs so that what happened in the past do not happen again.”

    Olagunju, however, said there was the need for Nigerians to change their taste for foreign goods and consume what they produce rather than consuming what they do not produce. He said now that Nigeria has foreign exchange crunch, the country is being forced to leave  foreign goods the more.

    Abia State Governor Dr. Okezie Ikpeazu expressed happiness that the Federal Government has finally recognised Aba as the hub of manufacturing not only in Nigeria but also in sub-Saharan Africa.

    He enjoined Abia indigenes to freely interact with various government agencies at the two-day event, noting that it was held to make their doing business in the state easy.

    On his part, Nigerian Association of Small Scale Industrialists (NASSI) Director-General, Imo Anasonye, described the event as a welcome development, adding that it was a good start for the government’s diversification programme from the non-oil sector.

    “What is happening here is a good thing in the sense that Nigeria wants to rebrand economically, diversifying from oil to the real sector, which is the productive sector.

    “That the maiden edition of the MSMSE Clinic is happening in Aba is not by accident because Aba has been the cradle and home of craftsmanship in Africa. There is no product that can be made locally that is not made here”, Anasonye added.

  • GE to invest in Nigeria’s refineries

    United States (US) multinational General Electric (GE)  in Abuja proposed to invest in Nigeria’s three refineries located in Port Harcourt, Warri and Kaduna.

    The firm, in a presentation to the  Nigerian National Petroleum Corporation (NNPC),Group Managing Director(GMD), Dr. Maikanti Baru and his team, said that its team of partners, including its consortium involving the Engineering, Procurement and Construction (EPC) partners, off-takers, traders and some financiers would be engaged in the initiative.

    The multinational headquartered in Boston, Massachusetts, is worth $493 billion in asset. Its business focus areas include oil and gas, power, water supply, aviation, healthcare, transportation and capital.

    “We were involved in the tenders that started around last year, which was subsequently withdrawn, but our commitment to bringing the refineries on-stream is still very deep and we are very serious about it. We propose that work commences either with the Warri or Port Harcourt Refinery as a pilot, as we set a target to improve the refinery capacity before the end of 2017,’’ the company stated in its presentation.

    GE’s desire to partner with NNPC on the rehabilitation of the three refineries came on the heels of a similar proposal by Italian company Eni to establish cooperation with NNPC for the rehabilitation and enhancement of Port Harcourt refinery as contained in the company’s recent release in Rome.

    Leading a high-powered delegation to the NNPC Towers, GE Global Chairman and Chief Executive Officer Jeff Immelt said as part of the offering, GE and NNPC have identified some major national power projects in the country and are  developing the scope of intervention in the projects, which have a potential combined capacity of about 4.4 gigawatts.

    GE further pledged its readiness to work with the NNPC to make production in the off-shore fields profitable for the benefit of both companies and other stakeholders. It expressed hope to consolidate on its  working relationship with the Corporation to expand the prevailing power business and help NNPC achieve its vision of becoming the leading power company in Nigeria.

    Welcoming the GE team to the NNPC headquarters in Abuja, Baru expressed delight in the interest GE had to intervene in some vital operational areas of the corporation. He noted that GE’s offer of a package that includes projects financing would greatly improve collaboration and initiate the power projects rapidly.

    The NNPC GMD also welcomed GE’s offer for support to boost the nation’s offshore production and raise crude oil reserve ratio replacement. He urged the company to also tap into the opportunities on offer in medical supplies, as the NNPC moves to commercialise the services of its 52 hospitals and clinics spread across the country in the years ahead.

  • Fed Govt mulls fertiliser price slash to boost agric production

    The Federal Government plans to slash the price of Nitrogen, Phosphorus and Potassium (NPK) fertiliser to N5, 000 per bag to encourage farmers to boost agricultural production in the country.

    The Minister of Agriculture and Rural Development, Chief Audu Ogbeh, who made this known to newsmen in Abuja, said the plan is to make food production easier and enhance profit for farmers in the country.

    The minister said the government would take delivery of the first shipment of 800, 000 tonnes of NPK fertiliser from Morocco by January 27.

    According to him, government wants the blending to take place everywhere in the country so that farmers can have access to fertiliser at the lowest possible cost.

    A bag of NPK  costs between N7, 500 and N9, 000 in the open market. But with the first shipment of phosphate from Morocco expected to arrive today in Lagos and then the blending done here, Ogbe said: “We are bringing the price of fertiliser to N5, 000 per bag.”

    He explained that the government wants to ensure that every blender in the country who has the capacity will blend.  “If we can bring the prices of fertiliser to N5, 000 per bag, food production will become easier and farmers will enhance their profit,” the Minister said.

    He said this was why the King of Morocco (Mohammed VI) came to Nigeria and the reason  why President Muhammadu Buhari visited Morocco. “The target we have is about 800,000 tonnes of fertiliser per annum from Morocco, but the problem we have is that we do not only satisfy Nigerians, our neighbours always come in and take a bit,” Ogbe said.

    While noting that Nigeria cannot deny her neighbours entirely, he said “we have to satisfy ourselves first.’’

    It would be recalled that indigenous conglomerate Dangote Group and the OCP Group of Morocco had in December 2016 signed an agreement to import more than two million tonnes of customised fertiliser into Nigeria.

    The agreement was meant to boost fertiliser production and businesses in the country within the next three years.

    The OCP Group is said to be a global leader in the phosphate and phosphate derivatives market.

  • Nigeria okays WTO trade pact

    Nigeria has ratified the Trade Facilitation Agreement (TFA),this makes her the 107th World Trade Organisation (WTO) member to endorse the agreement, the Ministry of Industry, Trade and Investment, Dr. Okechukwu Enelamah, has said.

    The minister’s Strategic Communications Adviser, Constance Ikokwu, in a statement in Lagos, said Enelamah submitted Nigeria’s instrument of acceptance to WTO Director-General Mr. Roberto Azevêdo at the just-concluded World Economic Forum (WEF) in Davos, Switzerland.

    According to the statement, only three more ratifications from members are needed to achieve the two-third threshold that will bring the TFA into force. “Nigeria’s ratification of the TFA is a reflection of our commitment to the WTO and a rules-based economy.

    “It is evidence of President Muhammadu Buhari’s commitment to rapidly implement his presidential initiative on the creation of an enabling environment for business. Nigeria would like to see a strengthened WTO that reflects the development principles of developing countries like Nigeria and we praise the effectiveness of Azevêdo in this regard,” Enelamah said.

    Nigeria was said to have submitted its Category A notification to the WTO on November 10, 2014, outlining substantive provisions of the TFA it intends to implement upon entry into force of the agreement.

    According to the statement, the TFA will enter into force once two-third of the WTO membership has formally accepted the Agreement. The TFA contained provisions for fast-tracking the movement, release and clearance of goods, including goods in transit.

    “It also sets out measures for effective cooperation between customs and other relevant authorities on trade facilitation and customs compliance issues. It contains provisions for technical assistance and capacity building in this area,” the statement said.

    It added that a 2015 study conducted by WTO economists showed that full implementation of the TFA would reduce members’ trade costs by an average of 14.3 per cent, among others.

    Other African countries that have ratified the agreement are Botswana, Niger, Togo, Côte d’Ivoire, Kenya, Zambia, Lesotho, Mali, Senegal, Swaziland, Gabon, Ghana and Mozambique.

  • Power privatisation: Consumers renew push for review

    Power privatisation: Consumers renew push for review

    More than three years after the privatisation of the power sector, consumers are yet to enjoy improved electricity supply. This has prompted renewed calls for  the review of the exercise. Will the government bow to pressure and reverse the deal? Assistant Editor CHIKODI OKEREOCHA looks at the lingering crisis in the power sector, which appears to have put  the government and private investors on the spot.

    The Federal Government appears overwhelmed by the crisis in the power sector. The Minister of Power, Works and Housing, Babatunde Fashola, personifiedthe government’s seeming helplessness when in last November, he said the privatisation of the power sector was not up for review.

    This followed persistent calls by aggrieved consumers for a review of the sector’s privatisation, which, according to them, was not only flawed, but has evidently failed to yield the desired result more than three years after.

    However, beyond harping on the need to open up opportunities for more investment in electricity Generation and Distribution Companies (GenCos) and (DisCos), the minister’s clarification failed to provide a clear roadmap on how to turn things around.

    Fashola, who spoke at the Fifth European Union (EU)-Nigeria Business Forum  in Lagos, with the theme: “Harnessing Nigeria’s potential for economic growth”, insisted that his ministry would remain committed to the terms of power generation and distribution contracts it inherited.

    “If revisiting the agreement means cancelling it, I won’t support. The investors who took the risk must have the assurance that government will not flip-flop. A contract that fails has consequences not only for the investors, but on both sides. This government will respect and uphold the contracts it has committed to and inherited. If there are issues with the contracts, the umpire is the judiciary,” the Minister said.

    Although Fashola’s position that a review or reversal of the privatisation was not on the table may have been prompted by fears that a reversal would scare foreign investors, aggrieved consumers and other critical stakeholders have refused to be swayed. They have continued to mount pressure for a review, insisting that Nigerians have been short-changed by the investors.

    To bring about efficient service delivery, the Federal Government in November 2013 unbundled the defunct state-owned Power Holding Company of Nigeria (PHCN) into 18 successor companies and subsequently handed them over to private investors.

    The Bureau of Public Enterprises (BPE), which midwifed the process, projected that the private investors who bought 60 per cent shares in the power assets would increase electricity generation capacity to 20,000 megawatts by 2018.

    It was envisaged that the sales would reduce the losses of Aggregate Technical, Commercial and Collection (ATC&C) caused by poor maintenance of the network and poor revenue generation.

    This was why the 11 DisCos in a Service Level Agreement (SLA) with the BPE agreed to reduce losses significantly within five years. They also promised to roll out meters to ensure that customers are no longer exploited under the estimated billing methodology.

    On their part,the GenCos said they wouldl turn around the three hydro power plants and other gas-fired plants and expand their capacity to generate more power supply above 5, 000 megawatts (mw).

    The Nigerian Electricity Regulatory Commission (NERC), the electricity industry regulator, rolled out the interim rules and other electricity market code to guide the private operators in doing business as well as setting Key Performance Indicators (KPI) for the investors.

    But none of these has happened more than three years after. Rather than enjoy a significant improvement in electricity supply, Nigeria’s electricity generation capacity has worsened in recent years, setting the authorities and the investors on the war path with angry consumers.

    For instance, the immediate past president of National Union of Textile Garment and Tailoring Workers of Nigeria, Comrade Oladele Hunsu, observed that while Nigeria was generating more than 4,000 megawatts (Mw) of electricity before privatisation in 2013, electricity generation capacity is currently wobbling between 2,000Mw and 3,500 Mw.

    He lamented that several electricity consumers were yet to be metered years after the privatisation, adding that this underscored the abysmal performance of the sector.

    While describing the private investors’ failure to meter all consumers as illegal, he accused the NERC of failing to properly regulate the industry.

    Hunsu, therefore, advised President Muhammadu Buhari to review the privatisation, noting that only a transparent review to unmask those who bought the PHCN’s unbundled assets and their capacities would resolve the crisis in the sector. “We need to investigate how those DisCos and GenCos were sold and who bought them,” he insisted.

    The unionist said reviewing the process would not only save Nigerians the agony of paying for darkness, but also incentivise the real sector, which comprises manufacturing and agriculture. According to him, real sector operators bear the brunt of inadequate electricity supply, which has continued to stunt the growth of the nation’s Gross Domestic Product (GDP).

    However, the alleged failure of the exercise to set the stage for a major transformation of the sector to guarantee uninterrupted electricity supply to the manufacturing sector and Nigerians in general is not the only knotty issue prompting Hunsu’s call for a review.

    He expressed surprise that despite the investors’ obvious failure to turn things around, thegovernment is still determined to continue dolling out public funds to the investors as soft loans or bailouts to enable them run supposedly privatised entities.

    Peeved by such largesse, members of the  Senior Staff Association of Electricity and Allied Companies (SSAEAC) urged the Federal Government to shelve its plan to issue a N309 billion bond to finance the power sector.

    “Issuance of bond will amount to spoon-feeding the operators for their inefficiency. The bond will be at a cost to Nigerians, as the risk of default will affect the government sovereign guarantee and lead to energy crisis in future,’’ its President Chris Okonkwo said.

     

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    Speaking to reporters in Lagos, last week, Okonkwo asked the government to assess the investors’ performance in the past three years in relation to the terms and conditions of the privatisation exercise that handed over the power assets to them.

    He emphasised that the anticipated efficiency in service delivery from the private power firms by Nigerians has been met with deception and failed promises, pointing out, for instance, that the investors have failed to provide prepaid meters to consumers within 18 months as agreed.

    Okwonkwo described as sad a situation where consumers were not metered, even as tariffs had been increased twice since 2013. “The government should come in, apply the terms and conditions of the sale and see if we can correct the mistake,” he said.

    He also said the power distribution companies have displayed inefficiency in revenue collection with 30 per cent collection rate as against 60 per cent that the sector recorded before the privatisation.

    The SSAEAC chief said the financial and technical inefficiencies of the power firms were evident in the shortfall of funds they were reporting despite enjoying series of interventions from the government.

    He said the Federal Government through the Central Bank of Nigeria (CBN) prepared a bail-out of N2013 billion as part of the Nigeria Electricity Sector Intervention last March , but the shortfall in revenue collections had continued to escalate.

    “We think it is time to re-appraise the content of the agreement that handed over PHCN to the private sector and its implementation. It is time to hold those who bought the power sector down for what they had signed that they will do. We want to know if they are doing well or not,” Okonkwo said, insisting that if the private sector could not manage the sector, the government should take it over.

    Why power crisis remains

    There have been several reasons adduced for the perennial crisis in the power sector. From alleged investors’ lack of technical know-how and financial capacity to run the sector efficiently to the challenge of gas supply caused by vandals and consumers’ reluctance to pay their electricity bills, the sector is indeed, gasping for breath.

    For instance, The Nation learnt that apart from the investment Federal Government made in the sector prior to the privatisation, the investors have not made significant investment in the growth and development of the power sector particularly in smart metering technology, upgrade of their networks and other power infrastructure.

    According to a reliable industry source, the dearth of investment contributed to the incessant power outages and the regime of estimated bills that has pitched consumers against the power firms.

    The source, which declined to be mentioned, said that because of paucity of funds, DisCos refuse to take their total power allocation from the market operator (MO), preferring to take little, which they serve industries and commercial entities considered as paying customers. This arrangement, however, leaves most residential areas across the country in darkness.

    The activities of vandals who compromise gas pipelines have also been identified as another challenge. Vice President Yemi Osinbajo admitted this much when he recently said  getting gas to the power plants remained one of the major hurdles before the administration’s commitment to stabilise power supply.

    Indeed, the gas sub-sector, The Nation learnt, produces the raw material for production of electricity. But because the sub-sector has not been privatised, the supply of gas to GenCos and by extension, the supply of power by DisCos remains a pain in the neck. But the activities of vandals are said to have compounded the problem.

    The situation is said to have put the DisCos under severe pressure by electricity consumers since they (DisCos) can hardly wheel power to them as they can only give what they get from the GenCos and transmission value chain.

    Osinbajo said while the privatisation process had taken place for power generation and distribution, transmission was still in the hands of the government, managed by Canadian firm Manitoba.

     

    Huge debt as an issue

    In fairness to DisCos, many Nigerians do not pay for electricity consumed. The Association of Nigerian Electricity Distributors (ANED) recently said DisCos revenue shortfall in Nigeria has hit over N300 billion. It, therefore, urged all power consumers, including government agencies to pay up their debts.

    The association’s Executive Director, Sunday Oduntan, said that the revenue shortfalls adversely impacted on the ability of its members to make capital investment in metering, network expansion, equipment rehabilitation and replacement that are critical for service delivery improvement.

    “This is a cash liquidity crisis that threatens to completely undermine the electricity value chain and its ability to continue to serve its consumers,” Oduntan said.

    Service providers also complain of energy theft. For instance, a Director in Eko Electricity Distribution Company (EKEDC), George Etomi, a lawyer, said energy theft by all categories of consumers was the greatest threat to private investors and the reform in the power sector.

    However, it remains to be seen how the government intends to handle these issues. But one thismg is sure: unless there is improved electricity supply, the hope of salvaging the economy from the grip of recession may not be achieved.