Buhari: Experts differ on power sector privatisation review

Power sector stakeholders have expressed divergent views about how the incoming
administration of Maj.-Gen. Muhammadu Buhari (retd.) should handle the industry,
especially the privatisation of key power assets.
While some call for a review of the privatisation of the power sector, others see
it as unnecessary and uncalled for.
According to some of the experts, a review of the privatisation exercise is
imperative because the supply of electricity across the country has not improved
despite that the sector has been in private hands for more than 16 months.
Top industry stakeholders as well as operators in the sector, in separate
interviews with our correspondent, said the aim of privatising the sector had not
been met as the country was still struggling to generate 4,000 megawatts of
electricity.
According to them, the projection before the sector was privatised was that by
the end of 2014, Nigeria would have been generating over 10,000MW.
But official figures from the Federal Ministry of Power on Monday showed that
the country’s peak generation as of April 12, 2015, was 3,263.6MW, while the
energy sent out was 2,988.72MW.
The Chairman, Society of Exploration Geophysicists, Nigeria, and former Head of
Exploration, Nigerian National Petroleum Corporation, Prof. Charles Ofoegbu,
said despite the inauguration of completed power plants by the present
administration, the sector had failed to deliver adequate electricity to the citizens.
He said, “The privatisation of the power sector needs to be reviewed. The
incoming government needs to do this before it can get the issue of power supply
right. We keep inaugurating power generating plants, but I had warned in the
past that power supply would keep diminishing and we have discovered that we
are not making progress but rather retrogressing in the sector.
“This is beginning to happen because we are getting shorter hours of power
supply whereas we are inaugurating many distribution and generation firms.”
Ofoegbu argued that an adequate gas master plan was not implemented, a
development that he noted had rubbished the privatisation exercise.
He said, “The reason for this is because we did not implement an adequate gas
master plan. It has not been fully implemented and you are beginning to put in
place generating points on a master plan that is not implemented. Gas supply is
not there. We don’t have adequate gas supply. There are some power stations
that we have in this country that don’t have pipes that take gas to them.
“Why should that be the case? Why should we not plan? Why should we not do
the first thing first? Then you inaugurate these massive projects while there are
no raw materials to power them.”
When contacted, the Chairman/Chief Executive Officer, Nigerian Electricity
Regulatory Commission, Dr. Sam Amadi, told our correspondent that the
incoming government would have to follow due process before it could review the
privatised power sector.
Amadi said, “A government that comes into power has a responsibility of
making policies.
“It can change policies, improve existing ones or can more vigorously pursue
existing policies. So, through due process, the National Electric Power Policy,
which also led to privatisation, can be reviewed by the incoming government to
meet certain demands and improve the industry.”
Analysts at FBN Capital Research noted that addressing the power challenge was
a priority for the incoming administration.
They said in a report, “One of the priorities for the new administration will be
the power sector. The outgoing Federal Government broke up the former Power
Holding Company of Nigeria, privatised its generation and distribution arms, and
indicated that transmission could also have a future in the private sector (rather
than under private management).
“Successful transformation of the sector could have proved a major vote-winner
in the presidential elections but remains far off. South Africa offers a salutary
lesson in the cost of neglecting the industry’s investment needs. It was often
noted that it generated substantially more power (than Nigeria) for less than one
third of the population.
“The new administration may care to look at the consistency of tariff policy. The
National Electricity Regulatory Commission indicated in Abuja on March 16 that
exchange rate weakness could well lead to a rise in the tariff from mid-year, yet
announced a 50 per cent reduction the following day. The cut did not apply to
residential users, who were granted a six-month reprieve from the increase
imposed on commercial and industrial consumers with effect from January 1,
2015.”
The analysts also urged the incoming government to resolve the impasse which has
prevented Geometric Power/Aba Power from starting production at its $500m
generating plant in Umuahia, the capital of Abia State.
But the Chief Consulting Partner, Energy Services International Limited, Mr. Akin
Bada, argued that the privatisation should not be reviewed; rather, the power
sector should be enabled to deliver.
He said, “PHCN was sold to people who were adjudged to be the best buyers.
It went through a long due process before it was sold. So, these buyers need to
have the chance to take charge. They have not been given the chance to take
charge.
“Secondly, there was no thorough due diligence on the PHCN assets because the
workers there were at war with the Federal Government on the sale of the
assets. During that period, none of the buyers could actually go in to assess
what they were going to buy. So on getting there, they found a different thing
and they must tackle these issues before things will work well.
“Also, in through last three or four months, every week we hear of the blowing
up of gas pipelines, and gas is our major source of fuel to power plants. And
when there is no gas, no energy will be sent. So, yes there are challenges but
reviewing the whole thing by going back to the drawing board may not solve any
problem. We have enough regulations and organs to take it to the next level.
They should be enabled and not reviewing the exercise.”
The managing director of a power distribution company in the South West told
our correspondent that reviewing the privatisation depended on what the incoming
administration want to consider in the entire process.
The official, who spoke in confidence, said, “I don’t think a total review of the
whole exercise will mean well for the sector. But reviewing some policies in the
sector that will allow power firms to perform better will make a whole lot of
sense.
“There are some issues that we often discuss with the regulator and such
concerns can be looked into by the incoming government. So, it depends on how
they wish to go about it.”