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Reforms In Urgent Need Of Due Process

Published by Guardian on Sun, 09 Sep 2012


AMID towering hope in 1999, former President Olusegun Obasanjo promised to fix the comatose energy sector by increasing generation from 3,000 megawatts (MWs) to 6,000 within 18 months in office. Similar promises had been made by successive administrations. Such assurances were also branded in what has become power reform, a working document handed down from Chief Olusegun Obasanjo.Upon the Obasanjo pledge, the late Chief Bola Ige, Minister of Power then, stirred the emerging hope in a paper he presented in New York. Titled the Power Market in Nigeria in the Millennium, the paper detailed how the government intended to complete a total of 186 rural electrification projects in the last quarter of 1999, and 400-500 similar ones the following year.While people were still questioning the failure of the promise in 2001, the government blazed an experiment that would birth the power reform. This time, it dared a grand plan that would lay foundation for the emergence of the National Integrated Power Plants (NIPPs). Under the National Electric Power Policy template that was given legal framework via the Electric Power Sector Reform Act of 2005, elaborate plans were set out that would form the most critical elements of the reform.The Act renewed public confidence in the administration to deliver, even though many people were still doubtful the administration would deliver, as official corruption and bureaucracy kept eroding the better chunk of public spending.The law became a basis for the administration to initiate a gargantuan scheme under the NIPP arrangement, with a pledge to raise generation by additional 10,000 MWs at the end of 2007. But rather than delivering on promise, supply dwindled ' a situation that turned the $6 (or $10) billion allegedly spent on the project into torrents of controversy.Obasanjo, many believe, failed to faithfully implement reform in the electricity sector. He was said to have been convinced by his power minister, Liyel Imoke (now governor of Cross River State), to invest in what was originally conceptualised as the Niger Delta Power Programme but later renamed the NIPP.Prior to NIPP, Dr. Olusegun Agagu, Imoke's predecessor, awarded contracts to construct the Geregu, Papalanto and Omotosho power plants in Kogi, Ogun and Ondo states, respectively. The three plants were hurriedly commissioned by Obasanjo before he left office in 2007. Not one of the plants has been able to operate optimally due to unavailability of gas to power them.Early in 2006, Imoke made a strong case for deferring reform in the electricity through unbundling and privatisation of the state-owned electricity supplier. He felt it would take forever to attain the set plan, and that such might not achieve quick wins sought by politicians. He convinced Obasanjo to release funds from the Excess Crude Account to NIPP, to ramp up electricity generation to 10,000MW within 18 months.The government focused primarily on building new thermal power plants and rehabilitating some of the older power plants in the country. Concentration seemed to centre on increasing generation capacity while expanding and reinforcing the transmission grid, upgrading distribution infrastructure, expanding the gas pipeline infrastructure to the new plants/future plants were neglectedBy the time the administration realised that its target to increase electricity generation to 10,000MW by the end of 2007 was defective, it was too late to reverse the loss incurred after about $6 billion was reportedly pumped into NIPP projects alone.At a point in the power reform process, it became important to instituted a legal backing for commercial regulation of the sector; that was to be done as part of incentives for luring private investment into power generation. Obasanjo's administration, through the 2005 Act, established the Nigerian Electricity Regulatory Commission (NERC). NERC was given additional responsibilities for setting up and administering the Power Consumer Assistance Fund, which should subsidise underprivileged power consumers in the country. That was done ahead the planned full commercialisation of the sector ' an idea that is just being achieved through the recent increase of electricity tariffs.NERC was also mandated to establish a working template that would ensure that both consumers and investors get fair value from their relationship as expected from in every other business transaction. The commission's activities seem to establish a new orientation among electricity users that power is a commodity that should be fairly paid for. It would also regulate the rural system and determine the contribution rates to be sent to the Rural Electrification Fund.FOR the late President Umaru Musa Yar'Adua, the story began in his third week in office when Mr. Joseph Majoku, retained as Special Adviser on Power from the preceding administration, gave a presentation on the true state of the sector, especially with regard to how terrible the country was doing. He said power generation capacity of Iran and Nigeria was at the same level in 1970 while as at 2007 Iran, with a population of 70 million, had achieved a power generation capacity of 42,000 megawatts. Nigeria, as at then, was still struggling to achieve to sustain the 3,000 megawatts it was generating.Whereas South Africa distributed an average of 800 watts per person in 2007, Makoju said Nigeria's was 30 watts per person. According to him, it would take 104,000 megawatts of electricity for Nigeria to match South Africa in per capita terms, a feat that would require a whopping $90 billion to achieve. His comparison of Nigeria with smaller African countries was damning'On a per capita basis, Senegal, Zambia, Ghana, Kenya, Gabon, Algeria, Libya, Mozambique and Cameroun (and several less-endowed nations) were generating more electricity than Nigeria,' he said.Majoku's exposition explained the terrible electricity situation Yar'Adua inherited in 2007. It should also be noted, however, that given the grim situation Obasanjo met in 1999, he could be commended for unilaterally using the Excess Crude Account (which belonged to the three tiers of government) to finance his power programmes.But such act was difficult for Yar'Adua to follow having publicly declared commitment to the rule of law. With the governors threatening court action and given the Supreme Court ruling on Lagos State versus federal government on the withheld local government fund, the President was advised that unilaterally sourcing money from the Excess Crude Account was not sustainable and would backfire.He would find his own way around this problem but even at that, there were immediate issues with NIPP, under the Niger Delta Power Holding Company, which only came to light when Yar'Adua resumed office. What compounded the situation was that Obasanjo reportedly left no hand-over notes with which his successor could understand the details of government's commitments in the sector.For instance, when Mr. John Rice, then Vice Chairman of General Electric (GE) and CEO in charge of infrastructure, visited Nigeria in 2007, to explain his company's role in the execution of the contracts for the installation of the turbines, he said GE had actually discharged its contractual obligation as a sub-contractor. While Yar'Adua had the impression that GE was the main contractor for the projects, Rice explained that the company's role was merely to ship turbines to designated ports in Nigeria.He insisted that GE had fulfilled its mandate by shipping in the huge turbines and accessories, which were then lying dormant and accumulating demurrages at the ports. It was then that other facts began to emerge about the projects even though contractors created the impression in the media that money was the issue.The installations were stalled because the civil works were not completed while the sites had not been connected through pipelines to the gas needed to fire them. There was also the case of a turbine that needed to be ferried across a river in Imo State where there was no connecting bridge in place. That was more than a year after the turbine was delivered.The first major policy decision by Yar'Adua was the suspension of all projects under the NIPP. This was followed by directive to probe the scheme. The suspension and probe saga, coupled with issues generated lingered while the projects suffered neglect. It was not until 2009 that Yar'Adua finally got the approval of the state governments to pump another $5.8 billion in the NIPP projects. With that, a new target of 6,000megawatts was set for December 2010. That was not also achieved.Explaining his reason for not allocating more money to power in the 2008 Appropriation Bill, Yar'Adua said: 'The $10 billion invested in the sector between 2000 and 2007 has not translated into power generation, transmission and distribution. So, we are exercising caution to ensure that any further funds to the sector would translate into production and delivery of energy to the ordinary Nigerian.'I have told the leadership of the National Assembly that the government will inject its share of the Excess Crude Account into power and the states have also assured me of what they will put in. Even if all these funds come in today, I will warehouse them until we get a clear direction, hopefully within the next one month, after which I will send a Supplementary Appropriation Bill specifically on power to the National Assembly.'Yar'Adua was reacting to issue raised by Mrs. Oby Ezekwesili, World Bank Vice President for the Africa Region, when she visited. Following the media reportage, which was slanted against Obasanjo, the then Senior Special Assistant on Power Sector Reform and NIPP co-ordinator, Mr. Foluseke Somolu, who was retained from the previous administration, waded in by conveying the impression that President Yar'Adua was lying. Somolu argued that the amount released to NEPA/PHCN during the period was $2.2 billion while a total of $2.96 billion was released to NIPP, bringing the grand total to $5.16 billion.Although Somolu, an experienced technocrat with deep knowledge of the industry, apologised to the President, he was nonetheless relieved of his job. The subsequent probe by the House of Representatives Committee of Power would further complicate matters but this was something Yar'Adua neither felt comfortable with nor approved.To compound the matter, former Speaker, Mr. Oladimeji Bankole, who apparently had personal scores to settle with Obasanjo, continued to harp on the issue. The controversy generated by the House probe ultimately helped to stall the execution of the power projects, as contractors were constantly harassed by lawmakers.NONETHELESS, in June 2012, the present administration would begin its foray into the thorny issue when it inaugurated the Presidential Action Committee on Power (PACP) and the Presidential Task Force on Power (PTFP) ' two bodies charged with the responsibility of overseeing the implementation of government's agenda for power sector reforms.If the bodies were simple, President Goodluck Jonathan's elaborate Roadmap for Power Sector Reform, launched on August 26, 2010, was not. That was when former Minister of Power, Prof. Berth Nnaji, still held sway as Senior Special Adviser on Power and Chairman of PTFP. The complexity of the programme had triggered some unpleasant comments with a columnist saying: 'the roadmap requires map readers.'The programme detailed the role of the private sector in the new power regime, ceding all aspects of the industry but transmission to the private sector. The blueprint would lay foundation for the final unbundling and privatisation of the Power Holding Company of Nigeria (PHCN).With the appointment of Nnaji as Power Minister in 2011, on the inauguration of the administration, the privatisation process was rigorously pursued except that staff of the state-owned company have vehemently opposed the plan. With the recent controversy over pensions of the staff and the resignation of Nnaji, notwithstanding government's assurances to the contrary. Interestingly, reports from across the country indicate indiscriminate load-shedding to an improved situation before Nnaji left the government. The privatisation process may have been stalled once again.
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