The unbundled assets of the defunct Power Holding Company of Nigeria (PHCN) were handed over to private investors in November 2013 under privatisation. The hope was that this will reposition the power sector for better performance and, ultimately, result in improved electricity supply. But, five years down the line, the anticipated deliverables are yet to come. Senior Energy Correspondent AKINOLA AJIBADE looks at the sector’s performance five years after privatisation.
When the Federal Government handed over the unbundled assets of the defunct Power Holding Company of Nigeria (PHCN) to private investors in November 2013, not a few Nigerians heaved a sigh of relief. Many of them thought that a dramatic turnaround in the fortunes of the troubled power sector was in the offing.
Their expectation was that the new core investors would bring in the much-needed investment capital and expertise into the sector and usher in a regime of improved electricity supply to consumers. It was also anticipated that an improved power sector under the private sector’s charge will push immense possibilities into the hands of operators in various sectors of the economy.
Such expectations were clearly justified. This is so, considering the fact that as at November 2013 when the power sector was privatised, the country’s electricity generation stood at a meager 3,718 megawatts (Mw), which was barely able to power Africa’s largest economy with an estimated 170 million population.
The hope then was that the new core investors would, in no time, meet some of the Key Performance Indicators (KPIs) handed over to them, particularly adding a projected 10, 000 megawatts (Mw) of electricity to the nation’s generation capacity. It was also expected that the new owners of the power assets will end the obnoxious regime of estimated billing and lack of electricity meters for consumers, among others.
To drive the performance of the sector, the Federal government through the Bureau of Public Enterprises (BPE), gave the new owners of the power assets KPIs, one of which directed the power distribution companies (DisCos) to supply meters to customers within five years, between 2013 and 2018.
The KPIs also compelled the power firms (DisCos and power generation companies (GenCos) to make funds available to fix infrastructure needed in the sector, improve supply of electricity and meet other obligations expected of them by the government.
But, five years down the line, the power utilities have failed to meet the KPIs. Some experts and electricity consumers, who spoke with The Nation, said the Federal Government and Nigerians may have got their fingers burnt, as the anticipated improvement in electricity supply across the country, following the privatisation, has failed to manifest.
Some of them were quick to point out, for instance, that despite the privatisation, the sector’s generation still hovers between 4, 500 and 5,000 Mw, a capacity, which according to them, is barely enough to power an economy still struggling to sustainably exit its worst recession in 25 years.
The immediate past president of Manufacturers Association of Nigeria (MAN), Dr Frank Udemba Jacobs, was one of those unable to come to terms with the sorry state of the power sector five years after privatisation. He described the nation’s unreliable electricity supply as appalling and frustrating.
According to Jacobs, irregular electricity supply has been hurting operators in the real sector. He said it has rendered many private sector operators redundant. According to him, the epileptic electricity supply has been frustrating manufacturers’ capacity to produce goods and services, as well as forcing them to rely on generators for alternative source of energy.
With operators committing a substantial part of their capital to buying generators in order to remain in business, Jacobs said the country remained far from achieving its goal of making the real sector contribute significantly to its Gross Domestic Product (GDP) and replacing oil as major source of earnings to the government.
His words: “In the last three years, manufacturers have spent more than N378 billion on the importation of generators, a development, which has hindered their operations. Yearly, companies spend N126 billion to buy generators. Usually, they borrow money from banks at very high rates of between 26 per cent and 28 per cent. Besides, they pay taxes, electricity bills and other payments to the government in order to avoid sanctions.”
The former MAN president said this resulted in the huge cost of operation, which manufacturers are contending with. “As at today, about 90 per cent of MAN members nationwide depend on generators in order to survive. It is not an overstatement to say that Nigeria is operating a generator economy, which is reducing the capacity of the sector to operate optimally,’’ he said.
Lamenting further, Jacobs said irregular electricity supply has forced many companies to relocate to neighbouring countries like Ghana, Togo, Cote’d Voire, where electricity is stable. He said, for instance, that corporate giants like Dunlop and Michelin were forced to leave the country because of erratic electricity supply.
He added that government’s failure to stabilise the electricity market five years after it was privatised does not augur well for a country that is aspiring to be one of the largest economies by 2020. According to him, no country can survive without a strong and virile energy sector, which would power the economy.
Informal sector operators lament
Renewable Energy Association of Nigeria (REAN) Chief Executive Officer, Mr. Segun Adaju, also regretted that the country was unable to provide stable power to its citizens years after it sold the sector to private investors. He said the effects of epileptic power supply are evident in the operations of many manufacturing firms across the country.
Adaju said operators in the informal sector such as welders, hairdressers, launders, fashion dressers and people who charge mobile phone batteries are worse hit, as many of them find it extremely difficult to operate due to the erratic power supply in the country.
Citing a paper titled: “The Implications of Power Failure on the Economy: Effects on the Operators in the Informal Sector,” he said over 90 per cent of operators in the informal sector of the economy have expressed disappointment over the poor state of the power sector.
The REAN boss said the operators, in a survey carried out by the organisation, described the privatisation of the power sector as a failure, as it has not impacted positively on their source of livelihood. He said the issue may have informed the decision of the operators to procure smaller size generators for their businesses, with grave consequences on their operation.
Adaju said: “The generators are assisting operators in the informal sector to improve their operations. However, the reality of using generators has dawned on many of them. Each time an operator fuels his small generator, known as ‘I better Pass My Neighbour’ in local parlance, for an average of 10 to 12 hours in a day, he spends about N1, 500.
“When N1, 500 is multiplied by 30 days, it amounts to N45, 000 per month. Operators would not have spent such amount if the government and the private investors that bought PHCN’s assets five years ago had stabilised the sector.’’
Adaju told The Nation that the situation in the power sector has worsened, blaming it on the inability of the power generation companies (GenCos) to access enough gas for their operations.
The lack of gas, he said, was compounded by the frequent collapse of the grids, which evacuates electricity to the power distribution companies (DisCos) for onward distribution to consumers.
A professional welder in Lagos Mainland, Mr. Ade Oyelami, lamented that he has been unable to meet the demands of his customers due to persistent power failure. He said despite the completion of the sale of PHCN’s assets on November 1, 2013, the situation has not improved.
“Unfortunately, the situation is getting worse by the day, as there is no power to do my job. I’m a welder and in the absence of power from the grid, I resort to generating my own power, which is often expensive to do,” he said.
Oyelami added that attempts to pass the burden of self-power generation to his customers have always been resisted. “To survive and stay in business, I often increase the cost of my services, but I usually get complaints from my customers, who say that my services and products are too expensive,” he said.
Continuing, an obviously frustrated Oyelami asked, “How will I survive?,” adding: “Recently, we heard that power generation dropped to about 2,684Mw in August 2018, which automatically means that small businesses like mine will fizzle out or better still relocate to neighbouring Ghana and Togo where power supply is stable.”
Groaning under arbitrary billing
Five years after the privatisation of the power sector, estimated and arbitrary billing have continued to pitch consumers with the power utilities. Consumers are still screaming blue murder over a regime of crazy billing allegedly foisted on them by DisCos.
They also accuse the DisCos of illegal disconnection of consumers, blaming the situation on the Nigerian Electricity regulatory Commission (NERC), the electricity industry regulator, which according to them, failed to call the DisCos to order.
The Director-General of the Consumer Protection Council (CPC), Mr. Babatunde Irukera, said DISCOs must stop further arbitrary billing and illegal disconnection of electricity consumers.
He said key complaints that the Council receives are arbitrary, unsupported and unreasonable billing; people not being treated with dignity. He also said the complaint resolution process was either lacking or unclear and there’s really no respect for people.
Listen to Irukera: “DisCos have got to a point where no one takes their bills seriously anymore because they are considered outrageous. I think the pressure on metering will not be so bad if the estimated billing was more transparent and reasonable.
“What DISCOs are doing is connecting their balance sheets to receivables from consumers, but consumers are connecting what they owe to what they receive. You see, people are complaining about supply because they, as individuals, have been responsible, but the DisCos have painted them with a broad stroke and disconnected even the responsible ones.”
Irukera said the approach of the Council, under his charge has always been that let the guilty man go free instead of punishing an innocent man. “For me, there’s something fundamentally, absolutely irreparable and inexcusably wrong with penalising people because of the conduct of others,” he added.
The President/Founder, Consumer Advocacy Foundation of Nigeria, Sola Salako, also said the sector has failed to achieve growth, because it does not provide stable power for the country. She stressed that it would be foolhardy for Nigerians to pay for electricity not consumed.
“The problem is that when consumers don’t know the reason why they should be paying for power, which they didn’t consume, they won’t cooperate with the DisCos. They may be unconcerned if the DisCos are telling them how much they are losing because they are not interested, as they feel they are being overcharged,” Salako said.
Continuing, the consumer rights activist said: “If they (DisCos) explain to consumers that this is what happened. We give crazy bills because people are by-passing meters and are not paying, they will help the DisCos fish them out. Most importantly, we have to bridge that deficit of trust, as soon as we can. After this, we can work as partners because we don’t want the sector to collapse.”
Power utilities, govt disagree
The perceived failure of the new owners of the power utilities, especially the DisCos, to provide meters to consumers, improve supply of electricity and meet other obligations has continued to generate controversy between them and the Minister of Power, Works and Housing, Mr. Babatunde Fashola.
The Minister recently accused the DisCos of sabotaging the economy by their actions. At some point, he called for a review of the privatisation process that led to the takeover of the power assets in November 2013.
These were contained in Fashola’s response to a 28-page document by the Association of Nigerian Electricity Distributors (ANED) in which the power distributors argued that most of the statements about the power sector that were made by Fashola were false.
The DisCos said comments made by the minister on metering, power generation, transmission capacities and stranded electricity, among others, were significantly distorted.
They accused the ministry of consistently promoting policies that had resulted in sector-wide confusion; infringing on the responsibilities of the various sector players; imposing its agenda on the regulator; compromising its independence; creating a lack of respect for contracts; as well as distorting and redefining the laws of privatisation.
The Director, Advocacy and Planning, Association of Nigerian Electricity Distributors, Mr. Sunday Oduntan, said DisCos have issued meters to 1.7 million out of 4.1 million customers.
He stressed that this was an indication that DisCos have been trying their best in the area of metering, contrary to the allegations that the power firms are not interested in metering customers.
Oduntan told The Nation that 11 DisCos would need about N305 billion for five years to provide meters, maintain their networks and perform other obligations. He said out of this figure, N299b will be required to close the country’s 4.1 million metering gap.
He added that as part of efforts to reduce estimated billing, the DisCos have metered all maximum demand customers in their networks and adopted measures to adjust bills of customers, if there are errors.
According to him, metering is a challenge, which the DisCos alone may not be able to provide solution to in view of the fact that it requires huge funding.
The way out
Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, urged the DisCos, GenCos, Transmission Company of Nigeria (TCN), gas suppliers, Nigerian Bulk Electricity Trading Company, and other stakeholders in the electricity value chain, to collaborate to enable the reform achieve its goal of providing steady power for the country.
He said the GenCos, DisCos and TCN have different roles, urging each of them to try and achieve its set goals. He stressed that this would result in the sector achieving its goal of providing uninterrupted supply of electricity in the country.
