Sustainable electricity: how Nigeria can get it right
I READ the worrisome statement credited to the Minister of Power, Prof. Barth Nnaji, in the Tribune newspaper of 21st November 2011 under the caption “Nigeria may never have stable power supply — Minister”, by Tunde Dodondawa. To start with, Prof. Nnaji does not strike me as just another typical politician whose fundamental motivation is to add the title of his current status as mere career attainment on his resume. Based on this sentiment, I hereby wish to set out with this discourse hoping he would take this as an open letter from a concerned Nigerian, find it a useful critique and be able to identify the contradiction in his avowed quest for electricity sustainability and some activities that could negate that patriotic intention, give room for negative speculation or result in a lot of motion without movement.
The ongoing battle with the Power Holding Company of Nigeria (PHCN) workers' union culminating in a continuous reference to the union as a major obstacle to reform is a critical sign that threatens the reform. As someone who desires that the eminent professor delivers in the interest of the common man, I wish to submit that what is being executed is not privatization of that sector but sheer 'sales' of public utilities that happen to operate in that sector, in this case, the PHCN and allied inventories – a reverse cash and carry – especially if ultimately the items are sold at prices reminiscent of previous exercises. There is a distinction between the 'privatization of the Nigerian electric power sector' and the 'privatization of a public utility operating in that sector'. The Unions would fight you, and their fight would have bite, because it appears strongly that fresh private sector initiative and investment are not essentially been enabled. What is taking place appears to be a mere transfer of ownership of existing mostly comatose inventories of PHCN to those considered private sector players. By this, you are directly making yourself a willing victim of the wise parable of not putting new wine in old wineskins. This is even as you ultimately give your adversaries myriads of reasons at close range to cite as evidence of your missteps. The paradox grows fangs in the face of the reality that your words convey the right desires and plans but the corresponding modi operandi, at least those so far widely reported in the media, are exactly in principle the failed experiment of your predecessors. This is why the unions remain critically important in your equation or strategic reform plan. They ought not to be!
Doing the right thing should not be difficult where good examples abound. In this case, the success of the telecommunication sector's privatization comes to mind. We need to learn from our successes as well as from our failures. That's why it's called knowledge curve. We got it right with our telecommunication back then even though the participating private investors at the time initially relied on the backbone provided by NITEL for some of their operations. Imagine if 'unbundling' NITEL into several bits and their 'sales' were the primary cards or the only cards on the table at the time! Imagine how that would have given added strength to and further embolden the NITEL union!
If I were in your shoes, my first prompt task would be to get Mr. President, members of the Federal Executive Council, the National Assembly and Nigerians to see the futility of a previous executive action in 2005 that sought to forge 18 good swords from the remnant of a thoroughly corroded and badly damaged sword. It is trite among Nigerians, bar those in denial in the corridor of power, that PHCN's only progress since then is limited to its notoriety for disconnection, scamming homeowners via illegitimate payments for electricity meters and meter maintenance fees, and vending prepaid recharge units while the very important tasks of generation and stable distribution reserved for 17 of PHCN's 'children' of which six ought to be generating while eleven distribute have suffered irreparably. Successive power ministers, including the incumbent, have revealed that total sector attainment never grew above the starting point except the bizarre findings showing that 'the megawatt' has actually ebbed below kick off point despite the infusion of several billions of fresh dollars. So if I were in your shoes, I would not touch or grapple with PHCN. Seriously, I might even throw some form of limited lifeline funding at it in the interim as part of a deliberate Change Management tactics, to make them happy and get them busy – and hoping they could, by some miracle, make something out of 'the talents'. Mostly, I would click the ignore button and allow PHCN to find its feet like NITEL. Goodluck to them!
If I were in your shoes, I would hold open bids that would allow both serious and not so serious investors from the private sector to transparently show interest and eventually ENABLE (with emphasis) new modern private energy companies that would be investing their OWN funds in setting up THEIR OWN modern local distribution firms from scratch. You know as I do, that with a robust energy policy aided by good legislation, the electricity business is a most lucrative one because of the indispensability of the commodity. I am sure we all know what constitutes a local distribution company vis-à-vis items like medium-voltage power-lines, substations and their ancillary facilities, transformers, poles, distribution wiring, electricity meters, plus parts, labour and control centres. I am equally certain we know that these are not impossibly expensive – especially when they are being procured by private individuals as against the cost-inflating politicians and civil servants in government.
Also, I know as a fact that most Nigerians know that majority of final nodal distribution via local electrification which includes installation of transformers plus poles and wiring to take power to their homes have become the routine tasks of state governments, community effort and individuals. Even the electricity meters in most Nigerian homes were paid for by the home owners! I mention these to put the limit of the mighty importance of current PHCN 'as infrastructure owner' at the local distribution level in its proper perspective.
It is a fact that privatization is the way to go. But privatization will perform better when the investor has his money at stake. Privatization will also perform better when the entire sector is being privatized rather than focusing principally on failed public utilities in that sector like the PHCN and fruitlessly attempting to make them represent the entire sector. This is part of the learning curve gained from the successful privatization of the telecommunication sector under Chief Olusegun Obasanjo. It shows that privatization performs better when investors apply their own money and when the entire sector is opened up unequivocally. This does not mean that the progress made by existing private sector investors should be discountenanced. No. In fact, if I were in your shoes, I would evolve ways to provide strategic assistance to any existing serious private investor who is making marginal progress and have those who merely display electricity licences as trophies in their sitting rooms dislodged from the industry.
Concerning generation, if I were in your shoes, I would approach and motivate, with super incentives, experienced multinationals like Mobil, Texaco Overseas, Total, Chevron, Oando etc to set up local energy production concerns AND encourage them to enter into joint ventures with smaller private investors, individuals, states and local governments. Why? This is because of two main reasons:
1) It is real serious business to meet the quantum of electricity needed by a population of 167million that has the same energy consumption pattern and industrialization ambition similar to Great Britain's which I estimated at approximately 976,435.97Gigawatt hour (GW.h) per year at a daily per capita power consumption of 667Watt (W). Even if we generously downgrade Nigeria's per capita power consumption to half of UK's because of the state of her industry, empirically, we will still be required to be able to generate at the moment a minimum of 55,694.50MW to get by - while our combined electricity generation capability from a mix of fuel fired plants (my preference) and other sources should really be around 111,389MW optimally, and;
2) Many of the firms listed above have several years of experience in actual electricity production while their industry reputation is an advantage for contributing investors – especially if individuals, small private sector players, local, state and federal governments would be investing counterpart funds.
It is in view of the enormity of this reality of what ought to be our power generation capability that I commend Prof. Nnaji's bulk purchaser of electricity scheme coined as Nigeria's Bulk Electricity Trading Company even though I would also raise a flag on the propriety of making it chiefly a government entity. It is my opinion that a better operational model for the bulk purchaser would be to empower it with robust legislation to utilize transparent accounting system, settlement capabilities, and self governance structures using bilateral cooperation involving limited government but sizable private sector involvement. My fear is premised upon what we all know about the inherent capacity of the civil service when its members occupy such vantage position and are superintending over activities that can be termed critical success factors. To understand my concern, we only need to take a look at the grave mismanagement of petroleum subsidy payments, and the manner its details have been so cloaked in secrecy – to the extent that even powerful Ministers of Finance and Petroleum conceded they lacked the capacity to redirect the subsidy away from a few powerful beneficiaries to its original goal and target (the masses), are unable to promptly produce detailed subsidy related transaction statistics and have had to engage the Nigerian parliament in what some have termed delay tactics. So how would the same government prevent similar abuse in a government-run Bulk Electricity Trading Company?
With regard to transmission, if I were in your shoes, I would get the Federal Government to pronounce the national grid a national resource by way of policy and legislation (in words and actions), initiate a national stakeholder team with representatives of federal, state, local governments and the private sector and stimulate an environment that would allow the setting up of tiers of private sector firms formed by a conglomerates of players in the energy sector to carry out 24/7 support and management services on the transmission power-lines by way of outsourcing. I would assume as Minister (and rightly so) that my role is not to compete with PHCN or go to war against the union but to create, within limited time, an environment that makes the power sector; the most sought after for local and foreign investors, a major employer of labour and a business environment where promising, trainable and adaptable Nigerian youths could look forward to for gainful employment and a place where even upwardly mobile members of the PHCN workers' crew would eagerly seek to change job on their own volition and join the services of the new private sector players. This is important because the consequence of active private sector driven local distribution upon PHCN (where PHCN is just another competitor) is predictable. Just imagine the potential for local job creation! The Minister of Power of the Federal Republic of Nigeria at this time in history has a unique opportunity to strengthen the private sector and assist investors to create thousands of permanent and sustainable jobs for bright Nigerians if the right things are done.
WHAT NIGERIA SHOULD DO TO GET IT RIGHT
If someone intends getting something as important as electricity right, my opinion and what I think commonsense suggests, is to deploy intervention models that have worked elsewhere with similar social and operational challenges as Nigeria. What past handlers of the nation's energy reforms have been doing and which appears strongly as the Minister's favoured direction is the fixation with the unbundling or selling of PHCN, making this goal the core of national policy trust as if PHCN is a well-managed invaluable and indispensable asset. In the process, they encumber themselves with union politics and even ended up spending more taxpayers' money to create newer assets for a PHCN that is structurally ill-equipped to yield the type of output required for a population of 167million. I often compare the philosophy behind this approach with the theme behind the often mouthed ban on rice importation when we are yet to commence rice production to any degree. In the third world, when you truncate legitimate access to what is, without the provision of what ought to be, you create big rooms for corruption via a thoroughly corrupt custom manning thoroughly porous borders. To underscore the lesson here, we only need to take a cursory look at the success of indigenous companies that ventured into computer and computer parts production despite these being at the cutting edge of technology. Who does not know that private sector players like Omatek, Zinox etc were only assisted with local content policy stipulates and not absolute ban on computer imports?
Back to electricity, even more telling is the continuous treatment of the nation's quest for electricity sustainability as a federal government's headache only, when the Minister could use his enviable position to activate the dormant state functionaries into a frenzy of positive activities by laying the groundwork and by setting good examples backed by appropriate laws and protective policies including ultimately getting the National Assembly to re-frame the relevant part of the constitution to reflect the need for a no-boundary mutually beneficial handshake in energy investment rather than further emphasizing exclusivity as promoted by the letters, motive and intent of the extant phrase which restricts state's investment to “areas not covered by a national grid system within that State” in Section 14(b), Part II of the Second Schedule (Concurrent Legislative List) of the Nigerian Constitution.
I would equally expect the Minister to explore the possibility of a measured (emphasis on measured) decentralization of production and local distribution, using however a strict cross-country uniform set of rules for standard and safety, even if transmission remains for the time being, chiefly centralized – in a way that the principle of transmission being an essential national resource, not in the context of a hoard or a status symbol at the pleasure of a big federal government – would accelerate attainment of success in electricity sustainability.
Also, what is this with the fixation with gas while naturally we should be relying upon a mix of fuel? We are one of the few nations with abundance of coal. Coal contributes to pollution? Then invest in clean coal technology! Although, there are countless options that offer cleaner energy, they however cannot boast of coal's energy density or the type of heating value required for our type of massive electricity need.
Strictly speaking, because of the way past handlers have bungled the reforms thus far, they have created a mental picture in the minds of Nigerians that electricity sustainability is ultra-rocket science. No, it is not! The Minister needs to follow a path that is different from those pursued by his predecessors. He must remember constantly that it was in this very Nigeria that his predecessors promised Nigerians 6,000MW (megawatts) of electricity, lavishly spent 6000MW equivalent of hard currencies but ended up with a zero MW contribution to the nation's energy 'portfolio'. Only God knows who gave them the idea of measuring their electricity 'progress' in megawatts in the first instance! You would have expected sincere people to create targets based on people's expectations and understanding – e.g., “we shall ensure uninterrupted electricity supply in 10 states of the federation within 2 years” would resonate with Nigerians better. Well, you can't tread the path of these predecessors and expect to arrive at a different outcome. Can you?
Olatunji is the principal energy consultant at Q7 Engineering and holds a Master degree in Energy Engineering from the University of Sheffield