Despite being privatised, the power sector remains sick, forcing many firms to either close down or relocate elsewhere. To address the problem, former National Independent Power Projects (NIPPs) Executive Director Dr Albert Okorogu, in this interview with AKINOLA AJIBADE, urges the Federal Government to provide incentives to investors to harness the alternative energy sector’s potential to boost off-grid power supply. Okorogu, Executive Vice Chairman of Green Elect, a French firm, which specialises in renewable energy, also urges action on gas shortage and dilapidated infrastructure, among others.
What is the state of the power sector?
The sector is in a horrible situation, in spite of the fact that many people have worked hard to reposition the industry for better performance. Years ago, when I was the Executive Director, National Independent Power Projects (NIPPs), I, alongside other Nigerians, worked to facilitate the growth of the sector. We tried to reduce the gaps in the supply of electricity in the country. But we realised that the more we worked, the lesser the results recorded.
Besides gas supply, what are the sector’s other problems?
Although gas is the major problem facing the sector, there are other problems. They are bottlenecks weaved around transmission and distribution of electricity in the country by people. They include dilapidated infrastructures, funding, sabotage and several others. To fix these problems, stakeholders, including the Federal Government, would need nothing less than N20 trillion between 2017 to 2020, at least, to produce 20,000 megawatts (Mw) of electricity. More money would still be needed because 20,000 Mw of electricity cannot be enough.
How many megawatts of electricity is Nigeria managing now?
Generation is not static. As at today, the country is generating 3,000 Mw of electricity. We are struggling to generate 4,000 Mw of power. In the past, the country generated 5,000 Mw of electricity, which dropped to 4,000 Mw and later 3,000 Mw.
How many megawatts do we need to stabilise power supply?
To answer that question, one needs to get the per capital income of Nigeria first. For better illustration, let us consider a case of South Africa, a smaller country, but with huge Mw of electricity. The country boasts of 45 million people, while its generates 40,000 Mw of electricity from both on-grid and off-grid sources. This include the traditional sources of generating power such as turbines and non-traditional sources as solar, wind, bio-mass and others. This implies that Nigeria, which has a population of 170 million people, must generate between 160,000 and 170,000 Mw of electricity to achieve the desired growth. When this happens, the country can claim sufficiency in the area of power supply. But as things are, Nigeria still has a long way to go.
Can the country generate 170,000Mw of electricity under the prevailing economic reality?
The feat is achievable. What Nigeria needs to do is to get enough money to record growth. Generating 170,000 Mw of power, depends on the funds, which the country has. Though Nigeria is not buoyant financially, however, it must make some trials. To achieve the feat, the government must create an enabling environment by formulating and implementing policies that would attract investors into the country. The investors must have the knowledge of the country they are investing in, what to gain from such investment and how to sustain it. When these happen, investors would come to Nigeria and the 170,000 Mw of power would be realised.
Has the Federal Government been able to get institutions abroad to finance the power industry?
I guess that is what the government is doing now. The government has shopped for investors abroad to help lift the sector. But, the country is batting problems such as rising cost of dollars and its attendant scarcity. This has affected the importation of equipment needed in the power and other sectors of the economy. I am happy that the Central Bank of Nigeria (CBN) is trying to solve the problem posed by scarcity of dollars. The earlier the apex bank arrested the situation, the better for the sector and the economy in general.
You said government alone could not provide the money needed to accelerate the sector’s growth. Are the banks well disposed to playing this role?
The local banks are not ready to finance the nation’s power sector. The local banks are not business friendly. They are not tailored to promote businesses. They are not taking the lead by creating a level playing ground for investors to operate.
But what about the offshore financial institutions?
They are also not ready. The foreign banks are unable to provide necessary assistance for the power sector because they do not see the initial commitment from their local counterparts. The local banks have refused to provide financial support for operators in the power sector. The foreign financial institutions are also not ready to assist the power sector in Nigeria. The absence of appropriate financing structure is causing problems in the industry. To solve these problems, the Federal Government must formulate the right policies to guide the banks, investors and other critical stake-holders on how to do business in the sector.
The double digit interest rate has made loans unattractive to investors in Nigeria. Will it not be an impediment to investors, who wish to invest in the sector?
Yes, it would. But Nigerian banks can minimise the costs of obtaining loans by reducing their interest rates. Also, the banks can provide flexible and cheaper means of borrowing money. Whenever banks provide loans to customers, they expect their customers to pay back within three years. This period is too short for customers to service their loans. This scenario, is different from what obtains in United States (US), where people get mortgages and are given an expanded period of between 15 and 30 years to pay back their loans, depending on the agreement, which they have signed with the firms offering mortgage services.
Why are buyers of the defunct Power Holding Company of Nigeria (PHCN) unable to finance the sector to achieve growth?
The answer is simple-the investors do not have enough money to invest in the industry. They have liquidity challenge, ditto other operators in the sector. Liquidity is a problem, which permeates every segment of the industry. The power generation companies (GenCos), power distribution companies (DisCos), Transmission Company of Nigeria (TCN), Electricity Bulk Purchasing Company Limited, gas suppliers and firms that provide renewable energy services, other critical stakeholders in the sector, do not have enough money to play with. When one considers the fact that all the stakeholders are having financial problems, one would not find it difficult to conclude that liquidity is a problem in the sector.
Investors in the assets of PHCN, gas suppliers, transmission agency and others, lacked the wherewithal to make the sector grow. There is no money anywhere. The DisCos are unable to get enough money for their operation, the transmission lines were vandalised and could not be replaced; the gas pipelines are being destroyed by militants in the Niger Delta region, and the electricity consumers are not paying their bills as at when due.
Emphasis appears to be on what investors can gain from investing in the sector and not its growth. Is that so?
Not really. Globally, investors are motivated by the desire to make profits. Every businessman is driven by profits and whenever Nigeria invites either local or foreign investors to assist in developing its power sector, the investors would be asking for returns on investments. When investors get dividends on their investments, they would attract more people to the industry. However, Nigeria has no clear statement as to what it would get from investors when they come. Frankly speaking, time has come for the country to change its mindset. The country needs to move from what I described as ‘power point presentation’ to the power plants production. To transit, the Federal Government must create an enabling environment for investors in Nigeria.
Why couldn’t the National Independent Power Projects (NIPPs) boost supply in line with the Federal Government’s aspiration?
The NIPPs are experiencing gas problem, and as a result, are unable to generate enough electricity for the country. Basically, the projects are meant to generate and distribute electricity for Nigerians. They have their own generating plants and distribution networks. But they are unable to produce sufficient power, due to problem of gas. NIPPs have good power plants, but unfortunately, the plants are unable to get enough gas to generate electricity. The owner of the plants, which is the Federal Government, could not provide letter of credits for suppliers of gas in order to assist the plants get enough gas for generation. Besides, the fact that gas pipelines and transmission lines were vandalised by unscrupulous people, posed a major problem to the operators of the NIPPs. Due to gas constraints, firms, are not ready to bid for the plants. Those who bided for the plants backed out later because of fears of leaving the plants idle because of the gas challenge.
Does that mean that the plants are not well situated?
The plants are properly situated by the government. The plants are managed by the Niger Delta Power Holding Company (NDPHC), a development, which ensured that they are cited where gas which is in the Niger Delta region. The plants are situated in the corridors of gas, but they are unable to get gas for production of power, due to certain problems. Though some power plants are cited far from gas, the NIPPs plants are not. Another problem facing the NIPPs is money. The projects are experiencing dearth of funds, a development, which has made it difficult for the government to complete them. For instance, the Transmission Company of Nigeria (TCN) owes NIPPs and other generation companies over N100 billion. The TCN is yet to pay the money due to one reason or the other. The debts have been transferred to the government of President Muhammadu Buhari by the administration of former President Goolduck Jonathan.
It is believed in some quarters that renewable energy sources produce fewer megawatts, and cannot provide the quantum of electricity needed for the economy. How do you react to this?
That is not true (Cuts in). Electricity generation is a function of money. It is only when you limit generation to prototype version that you would not generate enough power. That is when you use solar panel to generate electricity for homes. But when you use what is described as ‘concentrated solar power’ you generate huge megawatts. This type of generation could be compared to turbines, through which gas is used to generate electricity. Under the concentrated solar power, the operator focuses on the rays of light from the sun, use the steam, that is generated from it to drive the turbines. This method works favourably with the turbines and generates hundreds of Mw of electricity.
Can you expatiate on the process of generating electricity, using concentrated solar power?
This method is needed in communities. For instance, if a community needs five Mw of electricity and after going to the community, I realise the community has a lot of sunshine. I will create a mini or micro utility plant, which can be expanded to accommodate growth and flaws in the system. Through this, I would be able service many people, apart from those on the national grid. It is not a matter of how many Mw of electricity I can provide. It is a matter of meeting the specific needs of people. In generating electricity for the people, we try as much as possible to factor in the cost of extending grid from one community to another.
Why can’t Nigeria produce enough electricity from renewable energy sources despite its natural endowments?
There are enough natural potential in Nigeria. We have sun, coal, bio-mass and other natural resources in abundance to generate electricity. But the country is drunk with ‘petrol’ money. Everybody wants to make money through oil. But the government of President Buhari is trying to change the status quo. The government wants the country to diversify its sources of earnings. This government wants to wean us. You know when you have babies, you would like to wean the babies before you give them real food. This government wants to expose us to other things. We are so much exposed to petrol money such that we do not want to do any other things. I believe that once we are able to change our mindsets by exploring other sources of earning income, the country would be better. One of these sources is renewable energy, which can bring a lot of money to the economy, if well explored.
What other natural products can be used to produce power?
There is no reason why we should not start using clean coal, because it is available. For some time now, coal has been a dirty means of producing energy because of pollution. Also, we have bio-mass. In Lagos, there are more than 20,000 tons of wastes daily. We can use 8,000 out of 20,000 tons of bio-mass, to generate three Mw of electricity. We can also use diesel, wax or water from faeces to generate electricity. Onitsha, the capital of Anambra State, boasts of heaps of tyres, which can be converted to produce energy.
What can be done to improve generation through renewable energy?
The regulators are trying to come up with favourable policies to spur the growth of the sector. Few years ago, the government drafted the policies guiding the implementation of renewable energy. I was in the team that drafted the policies. Interestingly, the policies have undergone review and are coming up better. That was when I served as the Special Assistant on Renewable Energy to the former Minister of Power, Prof Chinedu Nebo. So, renewable energy solution is coming up in Nigeria and I believe the solution is the best for Nigeria, which is struggling to get things right in its energy sector.
What advice do you have for operators in the power sector?
A short-term ideas, factors or solutions would produce help in achieving long-term goals. The only thing, which the Federal Government can do, is to provide incentives to the operators in the sector by providing them with favourable policies. When this happens, operators would work well to provide money for the sector and the economy in particular.
What is the major problem of crude oil processing?
Processing crude oil into petroleum products such as petrol, diesel and kerosene is not a serious as Nigerians have been made to believe. But I would reserve my comment because the area is outside my purview.
What is your take on irregular fuel supply?
There is no way you can talk about irregular fuel supply without talking about other factors that are associated with it. One of them is the price of fuel. The fuel price in Nigeria is better, when compared with other countries. The only problem is that the earning power in Nigeria is not commensurate with the price of fuel. The earning power of many Nigerians is low, hence the complain about the price of fuel. The price of fuel is still better. When you travel to the US, you would know that the price in Nigeria is better. Over there, the price of fuel is much higher.
The Nigerian National Petroleum Corporation (NNPC) has come up with Direct Sales and Direct Purchase (DSDP) import model, through which it would allocate crude to refineries abroad and get fuel in return. What are the prospects of this deal?
Like I said, I do not want to comment on projects that were undertaken by the NNPC. The Corporation has its own problems. I am not directly in that field, hence my refusal to say anything that would be in direct conflict with the organisation.
