Reynolds Dagogo-Jack is the Chairman, Presidential Task Force on Power as well as member of the Presidential Action Committee on Power. He spoke with Steve Osuji in Lagos recently shortly after the federal government divested control of major unbundled electricity generating companies. Excerpts:
If there is any timeline to the power sector reform programme (PSR) you must know about it; please can you tell us where we are right now?
The power sector reform programme was started by President Goodluck Jonathan in June, 2010 to that extent it is about three years old. The focus of the PSR is market reform, change of the current ownership, attracting new investment in generation into the market, expanding the transmission capacity to increase the ability to wheel more power and then transfer of the distribution companies to private sector to reduce losses, to increase efficiency, to increase metering penetration. Now it’s all these efforts that will combine to produce electricity. So pretty much we have been focusing on the electricity supply profile more than we should be focusing on the critical steps that must be taken so that the market reform will be concluded. Where we are now is that the market reform has come to an advanced stage. As at end of July, the last remaining assets – the generating company at Afam and the distributing company in Kaduna – the preferred bidders were announced and soon the National Council on Privatisation will declare whether these bidders have succeeded and will be given the offer to buy. So to that extent, in the sense of the elements that will drive us to a sustainable electricity market, a lot of work has been done.
But it just so happens that Nigerians want to measure the progress on the number of hours that we have and the quantum of power that they have which will come when the structural changes take root. So we have two challenges, first is to change the market, bring in private sector players. That of course takes some time to deliver. As we all know, just getting labour to come with us so that they will play their own role till new owners come has been one long round of negotiations, but until the new owners come, the expected efficiency will not come, until the efficiency comes, the supply cannot ramp up. Therefore, structural change of the market is more critical than power output because one leads to the other. But because we know that Nigerians will not appreciate it if we say we are doing a structural change and power is dropping everyday government has deployed resources to keep supply at the level we met it if we cannot add more but not to allow it to drop. That is what we call the service delivery leg of the reform. That is working but that has more challenges than the structural changes because that one requires people to continue to be as committed even knowing that there is a change of ownership. That one requires funding the sector even when you have sold some of these utilities. So that is slightly more difficult to manage but in the transition window, we are doing our best to make sure that we achieve a balance between changing the market and also sustaining the service level.
You are saying in effect that we are at the crossing over point of the transition. So how soon are we going to begin to reap results?
The truth of the matter is that until you have moved the ownership and the management of the sector into the private hands and until the private people have configured their business agenda, created the additional capital that they need to recover the lost capacities in our grid, changed manpower, retooled ICT, start to do those businesses the way private people do business instead of government, those things cannot be catapulted; there is so much speed you can run in that space.
But is it left solely at their whims, are there not some timelines no matter how loose?
Yes but let us look at it this way, you have sold them the assets. You cannot reprobate and approbate as the lawyers say. You can’t sell them an asset and the set a timeline for them as if it is not theirs. No. Remember they are profit driven people, they know the cost of these facilities, you don’t have to go and wake them up in the night to do their reform and their readjustment and reorganisation. It’s something that you should presume that it will happen. They borrowed money, the banks are on their back, you don’t need government to tell them to give us light tomorrow; light now becomes cash to them. Electricity supply is now their cash flow, you don’t need to teach a businessman how to make money. They are faced with a situation of no electricity, no cash; this is what we have been trying to communicate to the people for some time now. It is a step-wise thing, we move from one step of progress to another so we need people to understand that it can’t happen overnight, we need people to understand that we can’t take our eyes off the ball, we have to move in one direction no matter how slow that may seem but we have to move forward one step at a time.
I still think my point stands, I understand your explanation but this a strategic asset, there still must be some oversight, there must be a perspective on all these and I am saying that all these taken together, six months down the road, we expect so and so hours or quality of power supply in so and so areas of the country…?
I get you and I also think that Nigerians are very knowledgeable people, very knowledgeable. Such times when you want to hold down to a projection, it’s always good to caution yourself; sometimes it’s good to use benchmarks which will tell you whether you can approximate to it. This is because if you ask the people who did the telecoms reform to give any kind of projection as to where Nigerians will be in terms of teledensity, access to telephone, what they delivered and what they could have projected are miles apart. But you see a lot of pressure from Nigerians to kind of lock in a particular prediction whereas it is not scientific because to predict a market, you can only do so knowing the fundamentals. Yes our fundamentals are right; we are 167 million people and we need light and there is a market waiting to be tapped; we have capacity to pay and pay even more as we have seen in the telecoms sector in a relative sense as many have two or three handsets. So ability to pay is not the problem, availability of the population is not the problem as there are 23 to 24 million households in Nigeria. So, the demand is there. So are you saying that you will set the right platform for the private sector and the right tariff and the private sector will not cash in on it? So let us be faithful on the things we know which is to allow the private sector to take leadership here. By what you are asking, you are still trying to bring government into the mix. You need to support us to take government out then we go to the next step.
Labour matter is a major challenge. What is the situation right now?
Labour union has played a very critical role in the PSR. As most people know, we have reached the point when payment will start and as soon as that happens, the process of concluding this whole transaction will be pretty much assured. We believe that from the recent press release from the Honourable Minister’s office and from all the signals we have had from the Ministry of Power, payment will start very soon and that will be a major milestone and hurdle that we would have crossed. Let me also say that in terms of the cost of privatisation as relates to labour settlements, Nigeria is about to record one of the highest levels of financial settlement packages in order to reform power and move forward, but it’s a price the president is willing to pay because he clearly understands that there is no price you can place on darkness.
What are the figures?
It’s in the works, the Ministry has the accurate figures and it is better we get it from them but it’s slightly under N400 billion.
What is the gas situation now, we know that has always been a problem, is that problem solved now?
Okay, gas is a fuel for the generating plants just like all other elements in the value chain. They are moving targets. As we speak, molecules are being explored by the oil companies, pipelines are being built by the Nigerian Gas Company. So, every new capacity that is being added by way of molecules or pipelines increases availability of gas to the power plants. But to address your point, the truth is that in the past, the relationship between the gas owner and the generating plants was not contractual, it was what we call best endeavour. It was vertically integrated, government owns everything, if you are able to bring, bring, if you are not able to bring, don’t bring. We are moving away from all that. Part of this reform is that there will be a contractual relationship between the owner of the gas and the owner of the thermal plant. Such contractual relationship will be the basis for investment in gas; the basis for paying for gas that has been delivered without anyone saying that it is the government that owns them both. All of that is tightening up the system for efficiency. So, if the oil companies know that there is a contract, they know too well what a contract means. So, all of that are being put together and contracts are being signed as we speak.
Apart from gas, are we exploring other fuel options?
Yes, Nigeria is blessed with fuel sources but each source has a technology relationship and each fuel and technology matrix comes with construction time constraints. For instance, water, a typical medium to large hydro plant will require not less than six years before you have electricity, whereas a thermal plant, effectively delivered by a good project team will take about two and half years to realise. Of course, we could export coal if we want because we have a huge deposit of coal, but to convert coal to electricity will take a minimum of five years to realise. There has been a little bit of oversimplification of what is required to have electricity. Though there are other shorter sources, the renewable like sun which is technology-heavy. So, the cost of that is way higher than gas, way higher than coal and way higher than hydro, but again with improving technology, the prices are depressing. So we are looking at it. We have a lot of sun in the north and even in some places down south. Wind is another source of energy. We have a lot of wind and our wind map is very strong with potentials for wind turbines. So, all this will kick in when you see that the private sector has taken over the space. Even they will know well not to put their investments in one source but all this have to be market decisions. And because of our fundamentals which include heavy demand, and mark you, the population I told you is just home consumption, we have not factored in industrial needs large and small. At the end of the day, even the industries that relocated to Ghana will return because in Ghana you produce and bring it to Nigeria to sell, so why don’t you produce where you have the market. So, we expect an explosion of a dimension that we cannot quite stay here and project; it has to be methodical.
Talking about Ghana, how come they seem to have gotten there power right over these years while we lag?
No, that is not quite correct. Ghana is about 20 million people; it is about one fifth of Nigeria in land area. So, their transmission cost is almost zero compared to Nigeria’s. To transport power from Port Harcourt, for instance, to Yola, you know what that means. And after all the money you must have spent, it gets to Yola at half current so we are not in the same league. We supply them gas to fire their turbines. Ghana currently produces fewer than 2000 megawatts. When it produces up to 2500 megawatts the whole country will have power for 24 hours uninterrupted but we are on 4000 and we haven’t started.
So are there any more challenges to realising the complete reform of the sector in the next two years?
Yes some of the major issues which we need to keep our eyes on and close-mark in order for us to totally realise the power reform agenda include gas, which you raised earlier. But we are talking about gas disruption through vandalism, some people have argued that there can be some sinister motives to frustrate our progress or whatever their motives might be, so you see gas lines breached for no reason because we know that it is the tapping of crude oil and condensate pipes that we knew but now they are bombing gas lines. You can’t even take the gas, so again we are worried as the rate is growing. If we continue to have that challenge, there will be no gas to fire the plants and we can’t get the electricity we are designing; people are right now building massive generation plants in the hope of using this gas. So, vandalism is a major concern. As we do our utmost best, we also appeal to Nigerians to show some sense of patriotism and respect and safeguard our national assets for the good of us all.
The Second challenge is labour. We need to close out on labour issues. We need the whole Nigerians to impress it on labour that it cannot get a better deal than we are offering them. Besides, after all this money is paid, the people will not go to China to pick the workers for these plants, most of them will come back the next day to continue work because there are no other people to do this work apart from them. Only those who have reached retirement age or those who think they can venture out with the money in their hands may opt out. Every other worker who decides to roll over has a good chance to roll over. So the earlier they put the issue of severance behind them, the better for everybody.
The third challenge is transmission. As we work on generation, we must put transmission in view because it is the only aspect of the three segments that government is still holding as an asset for reasons of national security and issues of skill. We are doing that through the Transmission Company of Nigeria (TCN). So, there need to be conscious investments in this area in the short, medium and long terms.
Are you saying transmission cannot be privatised?
There is nothing that cannot be privatised but national grids in most countries are not privatised but can be concessional. But what we did is to bring in a management contractor, Manitoba, to manage it but the typical thing is to concession.
The other challenge is distribution losses. The distribution companies are the ones yielding the money, they are the customer interface. It is the distribution company that puts meter in your house and comes to bill you so we have to ramp up efficiency in that area. Currently, because they are government companies, the losses are very high; we have to bring them down. When the losses come down, the tariff comes down and the customer is protected from increases in tariffs. When the new distribution companies take over, they then begin to deploy the tools for bringing down the losses including metering; there are still a lot of people who are not metered. We have to spend money to even bring the losses down. So I am telling you those areas we have to be efficient in so that this light that you and I want so badly will materialise. As you know, Nigerians are just interested in light, light, light –
About time too –
But it is also important to know how the light will come. It is like someone saying he must go to Lagos but he doesn’t have any idea where Lagos is or how to get there. There is also the challenge of serious technical gaps. PHCN for 20 years has not employed yet we want to grow our current capacity from 4000 megawatts to 20,000 megawatts. So that is a ratio of five. These megawatts we are talking about are equipment which will be manned by human beings. So, we have a huge skills gap. What that means is that labour ought to be working as one with us because if they understand where we are going, they would know that this place will explode and they are the ones to reap the immense benefits of filling the skills gap, they will be the ones to be given crash training programmes to take new vantage positions.
Finally is the regulatory concern. This market can only work through strong regulation. We have NERC (National Electricity Regulatory Commission) in place. It is well constituted and has very capable people. So constantly, we have to keep looking out for areas where we will continue to make adjustments in the process so that both the customer and the investor are happy. These are basically the core issues we have our eyes on in order to wrap up the PSR.
Let me drag you into a bit of politics. By virtue of the fact that you are from Rivers State and also by virtue of the fact of your position, what is your take on the crisis in Rivers State?
Yes, being an indigene and a stakeholder who is impacted by what is going on, if you ask my honest opinion, what is going on is pathetic. But the more you look at it, you see in it, a deliberate agenda by the opposition, if you ask me, to distract the Goodluck Jonathan administration. It seems like a carefully orchestrated agenda to make sure that the president takes his eyes off governance because it is only governance that will yield the concrete milestones upon which the 2015 narrative will be engaged. We can’t go into 2015 in Nigeria talking about tribes or talking about zones. In 2015 we are talking about deliverables, what did you drop on the table while you are there? And that people know that the narrative of Nigeria is changing from tribe and region to performance, so if they can take his eyes off performance, when we get to 2015, the only thing that will be on the table is tribes and regions. This is the agenda of the opposition. Now what is upsetting people like us is that why should the people allow the opposition to define an agenda like that and suck them into the vortex of it.
But the president doesn’t have to be distracted, he doesn’t have to be concerned about the Nigerian Governors Forum (NGF) for instance, he has his duties well cut out for him in bundles?
You are right but do you know that when somebody thinks that his strategy will work, he doesn’t care if the strategy is actually working or not, he just works at it. But the strategy is obviously not working. The president is an administrator, he has line managers, some of the best, in finance, in agriculture, in trade and commerce. Look at the ministers there, they are top-ranked people, they are doing their job and they are delivering for the president. But because these other people’s interest is in the president and the presidency, so they come up with all this agenda, thinking that they are distracting the president but it is not working because they have to be distracting the whole executives; they have to stop them from working. But people are working 24/7. So, when it comes to 2015 will they realise that their strategy is not working. And you know most of these things people are saying it doesn’t come from the president, you know how it works.
In Rivers State, it is clearly a case of – both the people who grandfathered the governor and those that he appointed into his own cabinet are talking in different tones with him – is that the work of the president? The people who made him who he is in politics and the people he made are in the same room saying something different from what he is saying, was it the president that sent them? So, for me it’s a dysfunctional setting and it is unfortunate because it is the state’s resources that are suffering, it is the focus that should have been put in Rivers State that is being expended in Abuja, in other places and sometimes abroad. It is a loss of focus; it’s a loss, loss for us. We tackle somebody we shouldn’t tackle because we are thinking of politics, then you use all the energy you should have used to do your work to do something else and everybody loses, that is not on.
There are a lot of issues and we can debate it from now till tomorrow, so let’s look at resolution. How can the Rivers crisis be resolved?
To be honest with you, if the activities in Rivers State are a part of a grand opposition strategy, it will go on in one form or the other because it is an opposition strategy. But if it is as a result of a misunderstanding within a political family, it can be resolved, it is not too complex to resolve.But if it is a grand opposition agenda to needle the president and make him lose attention and focus until it is time for the next election, then it is an opposition strategy and you cannot tell the opposition not to play their game now. So, until we decode exactly what the problem is, to design a solution around it will be a nullity.
You see a lot of people are giving different dimensions to this problem, there is a programming of public opinion to talk about David and Goliath; there is a programming of public opinion to make it seem like a big man is trying to crush a small man which is all not true.
Which is why I ask again, can’t this small man be ignored?
No, the small man cannot be ignored if being in this position gives him visibility, relevance, importance, national narratives, drama – these are the values that are being played out. There has never been a debate as to take Nigerians to the next level in any of the areas of our national endeavour, it’s who should be governor-general and all that; that is all we have down there now.
