Electricity

POWER PRIVATIZATION: CAN NIGERIANS SEE THE BIGGER PICTURE?

By Engr Y.S Adamu

I actually do not intend to bore you with this power privatization thing which I have been writing on as far back as 2014 to date. Several voices ranging from prominent industrialists, politicians, economists, geopolitical associations etc have been commenting on. The mind boggling findings of the Ad-Hoc Committee on sales of the PHCN Successor Companies, of the House of Representatives, the Joint Statements of the Senate President and Speaker of the House  of Representatives as well as the latest Senate out-burst the same made me to once again write on this important and strategic National Infrastructure. In one of my earlier papers, I tried to give Nigerians the picture of the whole exercise as it was then. Now a full picture has emerged and it is ugly, confused and chaotic. You can also see why the exercise is derided.

It is increasingly becoming like Nigeria has signed a “suicide pact” with the power privatization. Power is the only remaining pioneer strategic infrastructure. Why sale it?

Prior to the Senate outburst, the Power Minister who has, since his assumption of office, been behaving like the attack dog of the so-called new owners suddenly became frustrated and made dramatic admission of failure of the exercise during a session with the new owners in Jos. It is only now that he sees the hand writing on the wall as he will be assessed and judged as a minister who killed the Nigerian Power Industry.

Anybody watching the way the process was handled knows fully well that the power privatisation is dead on arrival and may as well lead to the collapse of the power industry .First of all none of the operators was able to get 1st tier operator as its Technical Partner and even those that get the Technical Partners, the partners are just for the sake of meeting the sale requirements. These Technical Partners refused to take any stake in the companies. They all declined to provide supporting staff or experts to help guide the companies. Secondly the period during which the process was being handled the country was facing serious security challenges and the risks were enormous. Thirdly the state of the system especially the distribution network which is the last mile is a total mess and for anybody willing to come must be ready to start all over again and the amount of investment requires is huge and the expected return on investment is not feasible. Fifthly some of the companies have questionable credentials and most of the foreign Technical/Investors do not want their reputation to be damaged in their home countries. These are few snapshot on the reasons we could not have any foreign investors then and would not have now.

Apart from the above SNAPSHOT on the power privatisation there is one over-riding reason why the privatisation could not succeed. Power privatisation is very delicate and difficult even in developed countries of Europe ,Asia and Australia and most of them are experiencing difficulties with tariff and other things. These are countries that do things correctly compared to us.

As we await the final reports of the Senate as well as the Ad hoc Committee of the House (I hope they will make it public) I wish to reemphasize the need for a concerted effort to save the only remaining heritage infrastructure and caution those with the responsibility to provide us with reliable and stable power to avoid the collapse of this sector. We lost railways and we want to restart railways by going to China to borrow money to do it. We lost Nigerian Airways and we want to restart Nigeria Airways and we have no money to do it. We lost NITEL and if the Power Industry fails, I do not know what we would do that can spell doom for our dear country.

I thought a nation of 180 million people would learn from past mistakes and experiences. Experts within and outside the country say that the sale of the PHCN successor companies was fraudulent, nontransparent and favoured politically connected cronies with little or no industry expertise and the financial wherewithal. There is suspicion that these companies were not fully paid for and some were acquired through fake and fraudulent credentials. This appears to be true as these companies are mismanaged within 2 years of takeover and they are financially bleeding.

In fact, the Amadi led NERC raised a serious alarm when it conducted Open Book Review of the Discos 3 months after the handover of the Companies. The NERC was forced to soft paddle on its findings. In his Jos Declaration; the Super Minister said the same thing and confirmed everything Mr Amadi said. The only difference between then and now is that the finances are much worse.

REVISIT, REVIEW, REVERSE OR REVOKE, WHICH IS WHICH?

Reversing the sale is in order and in many countries governments have right to re-nationalize its asset and there is nothing strange about it. The Labor Party of UK wants to nationalize some of the privatized enterprises in its 2017 manifesto. The FGN has 40% Stake in these companies and this stake is by no means a small stake and hence the government has that right to take any action to protect its shares I would however, suggest some options for the FGN to explore in handling this matter.

There are some people who think that there is a kind of Legal Quagmire when the sale was legitimately made. While this may have some element of truth ,this writer believes the FGN has many legal points and advantage to use to take over the companies. Reviewing the power privatization is not as complicated as being taunted because it is not a blanket sale. There is agreement and within this agreements there are conditions so it is baseless to express any fear about it. Even if there is a legal quagmire there is national interest and which comes first above any interest. I suggest the followings steps be taken in handling any review as being over whelmingly supported by the people of Nigeria.

  • The Provisions in the Sale Purchase Agreement be fully exploited. The Government to set up Technical and Financial Committee of experts to check if these companies have complied with the parameters (Key Performance Indicators- ATC&C) they submitted to BPE and agreed to meet. A careful and thorough looking into these will reveal many short comings and flouting of the rules by these companies. These experts should look at the Operations and Financial Reports of these companies at hand over and now. This single exercise would show that the privatisation is a disaster.
  • Most of the companies especially the DISCOS have flouted many rules of the game as spelt out in the Sale Purchase Agreement as well as the basic principles of NERC guidelines. They have not fulfilled the many legal obligations in the SPA.
  • The FGN should call for Emergency Board or Extra Ordinary Share Holders meeting to discuss the operational and financial status of the companies from takeover to date. This would be welcome by consortium members of the companies as most of them would like to get out. This can give a soft landing for all the shareholders.
  • Check that the owners have really paid and confirm that of such payment were duly made into the treasury.
  • Any Company that has litigation (National and International) must be dealt with.
  • The mess we are in could have been avoided if the staff of the BPE who are on Boards of these Companies representing FGN 40% have done their duties. The mess could not have been made if they guarded FGN stake seriously. I am fully convinced that they are accomplices in the mess. They must be made to account for their deeds.
  • The key players in this power debacle are known and are around. They must be invited to explain their roles and why they short changed the country. We lost NITEL simply because the officials who handled this important asset are not held accountable and for this country to move forward and avoid similar mess no official is too big to account.
  • The NERC which initially took its job seriously suddenly abandoned its responsibilities. The issues raised by the minister in his Jos Declaration are supposed to come from NERC.I doubt very much if they have carried out assessments of the operations of these companies since their first report under Amadi.

 Is there a way out of this Carnage?   

There is massive anger, resentment and frustration in the country over this matter and the deepening silence from government over the last two years is very worrying. People are wondering the wisdom in ignoring opinions which were expressed by almost all who matter in this country including the National Assembly and the very people the exercise is supposed to serve, the 180 million Nigerians.

There are now several suggestions to the government by various interest groups ranging from privatisation zealots to those who want the status quo to remain. Some are making suggestion to float the shares and invite new investors. All these options would not work until all the mess is cleared and enabling environment is guaranteed. The investors are not crazy they follow what is happening by way of commercial intelligence.

 

On 29th May 2015, PMB in his inaugural speech said that our attempts to overhaul our electricity sector have brought darkness, frustration, misery and resignation among Nigerians. He sighted out unreliable power source as the biggest drag on Nigeria’s economy. This statement gave Nigerians hope that the first port of call in his fight for corruption would have been this sector. The World Bank estimates that blackout and lack of available power have serious negative impact on our GDP.

 

President, Sir, Nigerians still have confidence that you can do it and save this strategic infrastructure from collapse. I also believe you are concerned with the anger and frustration of the Nigerian People. The people who spoke and are speaking about this mess are not crying wolf. The entire power industry needs overhauling. You are doing your best to get our country out of recession but if no action is taken in the power issue; it would affect your efforts.

This writer does not want you to go down in the history of this country that you failed to address a very serious problem which is the economic equivalence of BOKO HARAM. If truth must be said the whole power situation in the country is fluid. I am sorry to say nobody including the minister knows even our generating capacity is too low. The figures keep changing by the day and reason for this is constant and is always attributed to gas supply. This constant statement being dished out to the public is embarrassing to you and a symptom of bigger problems with the system.

Various consultants and World Bank officials are working on power in this country for a long time and we are yet to see their impact. I suggest a HOME GROWN SOLUTION using our local expertise with hands –on-experience to get us out of this mess. This country is blessed with the professionals in this power sector who are far more experienced and versatile than any international consultants. They can be mobilized easily and quickly.

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