We have Developed the Right Energy Mix for Nigeria, Says Fashola
Hosted by the Editorial Board of The Guardian at the Rutam House headquarters, Minister of Power, Works and Housing, Mr. Babatunde Raji Fashola fielded questions on a wide range of issues − epileptic power supply, poor road infrastructure and inadequate housing for Nigerians:
Could you talk about power, infrastructure, particularly roads, and housing and shed light on government’s reforms in these area?
We started from a very difficult place. The difficulty of where we started from was embodied by a palpable desire for a change in administration. We also started at a time when not only were expectations high, there was also a global slow down economically.
For all of those dynamics, there were things we could not control because we do not control global affairs. All of those global dynamics have local consequences. The local consequences are the things we are dealing with. I can tell you that this administration has spent a lot of time planning and this is very important because planning takes time. We are in a result business as I continue to remind myself and everybody around me.
Therefore, until results become manifest, the planning really doesn’t connect with people. This year, I am optimistic that some results will manifest, but we will be climbing out of a recession instead of expanding growth. If you are climbing from the basement of a building, it takes some time to get to the ground floor. It will be better in my expectations than what it was in the preceding year. There are so many other things that the government does not control which have consequences on quality of life of the citizens but government still have a responsibility to try to manage the situation.
Lack of fund has been a problem for this administration. Coming out of the basement of recession, how fast or how well can it climb, especially in power?
Money is important but I have also argued, without seeking to sound contradictory that planning is perhaps much more important because if you have money and you don’t have a plan, money goes to waste. As far as our power sector is concerned, I lend my voice very clearly to its privatization, the reason among others being that there is public record that for over 60 years, we have managed power in the public sector and it hasn’t quite satisfied our expectation.
A couple of other things that used to be managed by government have gone into private hands and they have recorded some success. Although not all have thrived, in a commercial environment, those who couldn’t thrive have left the stage.
That said, I think there were some things that could have been done differently in the process of privatization. Even if I might have done some things differently, it doesn’t remove the fact that I might as well have made some mistakes. My attitude has been, let us manage the flaws, we can correct them instead of canceling the privatization, because that will only take us back to the beginning.
There is very strong evidence that every time we cancel contracts, first of all, we send negative investment signals that we don’t respect agreement.
Many investors don’t like that kind of behavior. In the event, we haven’t solved the problem by cancellation. I can cite one example, in 2005, Nigeria signed concession contract for its refineries to private individuals in this country. We complained, government canceled the concession and this is 10 years after, we are still importing fuel. One of those private individuals is now building his own refinery here in Lagos. Just imagine the time we lost and how much we have spent on importing fuel.
What I see in the power sector are really man-made problems, they are not engineering problems, they are not technical problems. Our engineers can get to work but there are issues from communities, like Right of Way. So, when people don’t get compensation because we didn’t plan resettlement in the project designing, what we end up with are court cases and injunctions just to stop development. We already have power plants in place but there are no gas pipes there. We are constructing gas pipelines now; but what was the planning that went into conceiving a power plant without a corresponding gas pipelines to it?
We have containers held up at the ports for years because contractors couldn’t get paid to clear their goods. Why didn’t they get paid? There was no provision in the budget and that is not an engineering problem. It is management and administration.
We understand the circumstances but how come the country is underperforming in nearly every issue?
It is not government alone that is to blame. Government is just an institution populated by people you and I know. I have a proposition in my mind that I haven’t yet fully detailed and when I do, I will perhaps share it. But I will answer your question by asking a question: How many people work eight hours a day?
“Let us go back and read Chief Obafemi Awolowo’s Voice of Wisdom and his advice on how to use 24 hours. Are we doing that? I am thinking in my head that if everybody worked for five hours a day, we would be amazed at what this nation would produce. We are supposed to work eight hours, but how many of those eight hours do we spend receiving visitors and doing other unproductive things”.
In your presentation last November, you said in your own template, government is more like a regulator, that it is only the transmission component government takes care of. With the current grid system and the ambitious plan to generate 2,000 megawatts this year, does the grid system have the capacity to achieve this?
I will call your question a rolled up play. Let me start with the opening statement: It is not about what I said; it is a statement of fact. With privatization, government is now a policy maker and a regulator. Government used to be the main operator – distribution, generation, and transmission. But government is now largely policy maker and regulator. Government still retains the transmission line.
There are a lot of literature about the power sector, there is a book I read when I was newly appointed minister by some scholars in Oxford, they analyzed five countries that have privatized, identifying their challenges. The story in those five countries – South Africa, India, China, Brazil and Mexico – is not different from what we are going through. Each country that has privatized has kept one part of the value chain, whether it is generation, distribution or transmission. They don’t privatise all three but there is no hard and fast rule which one you should keep.
The current energy mix is drawn in favour of thermal stations that are fired by gas. Is this wise in view of the challenges in the Niger Delta where the gas comes from? And what can be done to amend the power privatization laws to allow for embedded power?
Let me speak first to the energy mix, most of the industrialized countries have an energy mix. Most of Europe, especially the UK, and United States still have at least 25 per cent coal in their mix, they have 30 per cent gas and 20 per cent nuclear. The combination of their renewable energy made up of biomass, hydro, wind and solar is in the region of 20 per cent, solar accounting for quite very little because of the periods that they are out of sunlight.
Now, what have we done here? We have left our coal behind, we focused on our gas in recent times. This country used to have coal and hydro. The only coal power plant we had, we cannibalized it and broke it down. Pardon me for being lengthy but I think it will help to understand where we are. We focused on gas under the rapid national integrated power project, which was sensible in the context that we were flaring the gas anyway. We mandated all oil producing companies to start building power plants. That was how power plants like the ones by Agip, Exxon Mobil and a few others came up.
Gas is cleaner in Nigeria, so we are probably likely to do more of it. It is also quicker to develop and to deploy in terms of large volume. The landmass, the materials you will require to build a 1,000 MW of hydro power is perhaps four or five times what you will need to build gas. Like every power source, each one has its limitations, wind speed has its season, sunlight is not available 24 hours a day, coal has its ecological challenges, hydro is not available all year round, and gas is also subject to pressure issues.
So, we have developed an energy mix that responds to the point that you raised. We completed that last year around July at our National Council of Power summit. We see a lot of people trying to develop solar power here in the south but again it will be expensive because the sunlight here is not as prolific as it is up north. That is an investment guide and a policy statement that do more coal in the coal belt, more gas in the gas belt, more solar in the solar belt and more hydro in the hydro belt, so that we don’t have a repeat of power plants in obscure location that do not deliver on their expectations because of planning and conception issues.
In terms of the grid, there is a lot of talk about the grid being vulnerable. All of that talk, with respect, is not accurate. It may be yesterday’s story but we have repeated it in a dogmatic fashion without asking the question that this administration claims to have completed some grid programmes. I spoke about Alagbon, Okada in Benin and Sokoto, these are expansion programmes of the grid.
If we have completed those projects, clearly it can’t be correct for anyone to continue to argue that the grid is only 5,000 MW. I was at Ayobo here and we saw expansion programmes going on there. I have briefed members of the press at quite a few Federal Executive Council meetings announcing grid expansion projects in Kano, Kaduna, Osogbo. The grid can’t be static. We must also understand that the grid cannot leave the supply behind because it is under-utilised capacity and once you have that capacity and you are not using it, somebody is paying for it.
What is important is to synchronize the development of the grid, which is what we are doing to run slightly ahead of the expected power supply. Today, for the record, the grid capacity is also a function of simulation and simulation requires us to consult with everybody using the grid. At its best today, the grid capacity is 7,200 MW that we have build up to, at its very worst, it is 6,500 MW and we have not less than 10 projects still under development.
At the end of this month, we will switch on the transmission substation in Kaduna, that is part of the grid expansion, because it will start taking power from the Guwawa power plant.
In terms of embedded power, the real problem is that having sold the asset to Company A under certain terms and conditions. All who live in a particular area are customers of Company A. Anybody who wants to distribute power to the customers of Company A would inevitably be infringing on the commercial and proprietary interest of the owner of that asset.
What we are trying to do is to encourage the DISCOs because they hold contractual rights. Government would be sued if we show no regards to the contracts. So, we are encouraging the DISCOs to allow for extra power and use their assets to transmit to their customers. This was the point I made as governor when I was commissioning the Lekki Power Plant that if government allowed us, we could power Lekki within six months and I was quoted as saying that Nigeria could be powered in six months.
The point was that the power was there but because we couldn’t encroach on the territory of Eko Distribution, we could only use the power to power streetlights, which were public assets, our waterworks in Lekki and Victoria Island. So, there was a lot of redundant capacity and we were trying to factor an arrangement that if government agrees, we can power the residents in six months.
Is there no national planning document on ground for each of the sectors you man, for any incoming government to run with? The last administration did so much on power roadmap, why do we need to start afresh with each administration as if Nigeria is just coming out of independence? Again, with the plan you have spent time on, when categorically will you say Nigeria will have uninterrupted power; is it five years, 10 or 15 years?
Shortly after I took office, one of the things I decided to do was to lay out a roadmap, which I shared with the public and the roadmap is very simple. Start first to pursue energy anywhere, so long as it is safe. The first leg and the short-term plan was incremental power. Incremental power required us to do all what we have been doing, build up the grid, finish uncompleted projects, plan expansion of more power plants, develop the energy mix, license solar companies so that everywhere you can get extra power, you get it.
Today, as we sit down, it is difficult to precisely say this is how much power Nigeria needs because we do not first know how many we are. Not knowing how many we are, how can we then really know what we need? When we were playing games with our 2006 census, we have come to reap the whirlwind today. So our population is what anybody guesses it to be. Sometimes, we are 170 million, othertimes, we are 180 million.
If you don’t know how many guests are coming to the party, how many bottles of water do you buy? A nation is not different; it is the sum total of individual homes and families. Therefore, the sensible way to progress first is just increase the power. How much do we need? I am not sure until I have a census. Otherwise, we will have unrealistic and unempirical targets.
In the same way that housing has been estimated, the census was wrong and faulty as the Census Tribunal has shown because I went to court as governor to challenge the census result and we won. Several local government results in Lagos were nullified and our own results were upheld. If that census was faulty, on what numbers is the housing deficit being projected?
So, when I speak of planning, I speak very seriously and deeply. Otherwise, we would be running an endless race, with no dimension. So, firstly, get more power, any amount of power, and plan the process. That is what takes us to stable power.
The second step to stable power is how many people need power and if we don’t do that national audit, you wont know. Stable power means everybody must have enough at peak periods. Because there is peak period power demand and off peak period power demand. And then you must have a redundancy that allows you to do maintenance, because power equipment are all man-made, they break down. The same way that you have two generators in your house and you must fall back on one when one breaks down, you must have such capacity with power. That is our medium-term destination.
Then, long-term destination to uninterrupted power, which answers the question, yes it is possible. But at that point when we have stable power, everyone of us has a duty to now imbibe conservation of energy as a lifestyle because what is wasted will never be enough. To roadmaps and plans, I am not sure maybe I am the one who used the word wrongly but I distinguish between policy statements and plan. There is a national housing policy, which is affordable housing. What is the programme to deliver it? There is none.
I am working now to build a national housing programme, which must in my view pass two tests: It must be acceptable. The type of houses that are acceptable because of our diversity are not uniform. Our climatic, cultural and religious diversities must be incorporated. Some of the studies that we did suggested that in some parts of the country, male in-laws can’t use some of the conveniences that have been used by females and we spent the last one year getting feedbacks from architects across Nigeria trying to build a national housing programme.
What is affordable? “We see houses that have been built that are empty, people can’t afford to buy it or rent. Some of the housing policies have left the off-takers behind. We are now trying to connect with those off-takers what can they afford, and we cannot speak to every off-taker. We have just awarded the first of contracts to build the design that we have evolved. After then we will subject them to the test of affordability. The ones that pass those test become our platform for industralisation and rollout. It is like if you want to test this product, you don’t make one million bottles, otherwise you will lose”. You make some samples. It is when you have validated that the market will take it that you can proceed on industrialising it. That is the housing programme I am drawing up for Nigeria. There are all sorts of things that are called plans but they don’t show you the methods and the details.
Again, I was just reading one of Chief Awolowo’s speeches because I read him from time to time. He is one of the most prolific thinkers I have ever encountered not just in Africa. His thought processes were very detailed. He spoke about planning when he was delivering his speech to launch the Elere Cassava Initiative sometime in 1973. It took almost a year to plan it from report to implementation.
We don’t take these things serious. We just want to see everything happening. If the people you are working with don’t understand what you want to do, how can you have a common purpose towards what you cannot understand? Perhaps, let me rephrase that, we see football teams assemble together and we all see that they are not playing well because they have just been put together. That is evolution and preparation process. One or two years later, we see that team winning. The government is not different, it is a team. It takes time.
The civilian administration in 1979 has the Housing for All Programme; now with the issues highlighted above, should housing be a federal project?
Perhaps, you are right there. I would love to see governors take the lead as I did with the Lagos HOMS initiative. But I have also looked at models in the UK and Singapore, they were led by the national government. One thing government can do is to create a programme that everybody can then buy into. Housing construction for the poor, middle and working class is a seasonal event here. It should be a national annual event irrespective of what party is in government. It is when that is in place that the deficit noticed in the sector can be addressed.
For me, the biggest contribution I can make in that sector is not the number of houses I build. What I hope I will be able to leave behind is a programme that will have national acceptance and would survive irrespective of what party is in government.
Are there measures in place for efficient and well-structured mortgage system with the private sector collaboration considering the setback the Obajana project which Dangote had? What are the safeguards to ensure there is transparency in public spending?
We didn’t close on it, the background to it is that there is a tax policy that anybody whether individual or corporate who builds any infrastructure that is assessible for public use can actually claw back in individual or corporate tax rebate.
It wasn’t a policy for Dangote; that was a company that only took advantage of the existing law. I will do more of it if the opportunity presents itself.
In terms of public resources, I think the public procurement act was inaugurated in 2007. Between 2007 and now, the public space in spite of that regulation has been riddled with a lot of inefficiency and we are beginning to see all of the things that went on in spite of that regulation. The answer to the question is that government housing regime must be uniform. There cannot be two pricing for the same commodity by different arms of government.
Everybody relies on the pricing from the Bureau of Public Procurement, so you can’t even make a procurement essentially without going through them. And so some of the things that were credited to have been done by some ministers, I just wonder how some people find them believable in the very first place.
For example, I was alleged to have given somebody some hundreds of millions of naira for some political venture, how can people even think that this is believable. It is one thing to tell a lie, it is another thing to tell a poor one because if you just follow the public procurement law, you will know it is impossible.
There was something that was reported recently trying to scandalize the government that the Buhari government was planning to award an 800 million dollar contract and you think that can happen in secret. I am astounded at the pedestrian level at which people even conceive lies. A bad lie is just disgraceful. Nigeria is trying to borrow a billion dollars and you are alleging that someone is spending 800 million dollars for a project, excuse me! It just doesn’t make sense. The law is there, we will do our best to work within the parameters of the law.
As a minister for example, I don’t sit on any procurement committee, I don’t sign cheques. If people bother to understand the procurement process, that we advertise, we set conditions, all we do is evaluate bids when they come in to ensure they conform with our own in-house figures. We will only shortlist a few contractors and pass them on to BPP. It is BPP that looks at it and say no, the person you recommended as number one will actually be number two and depending on the threshold of the procurement, it may still then have to go to the Federal Executive Council.
That is the law and that is how we play. There are some procurement that are within the ministerial limit, it is a committee of officers in the ministry, not me. I don’t sit in that committee. I am not saying it is not possible, but the most difficult place to steal money is in government because you will have to collude with so many people.
Still on housing, going back to the last question, can we really do housing without the private sector?
Certainly not. Once that model is verified and accepted and it is affordable, we are going to use private sector to drive it. To mass-produce it. Government will then become the guaranteed off-taker, using the models of mortgage, so that X company that is now building our agreed standard and quality knows that, once he finishes, somebody has a mortgage to take it off him.
These are the ways I have seen housing developed abroad. That is why if you go to Europe, most of the houses you see in counties are uniform. That is where we are going, but you can’t build uniform houses that people don’t accept or can’t afford. The proposals we get from private companies A to Z come up with too many designs and that is not implementable.
Shelter is so important to any individual. How can government assist the masses to save and buy into this home ownership scheme?
Interestingly, for the first time in six years, the Federal Mortgage Bank is reporting surplus account half year. Against the backdrop of N4 billion losses, they recorded about N400 million surplus half year. Savings all flew out of the window from the time we grabbed the notion of free housing.
I think institutions like The Guardian stands in a position of great responsibility to get involved in the political fray in terms of subjecting political promises to rigour. I have heard people say we will build two million homes in four years. It is not possible. In the UK where they have complete industrialized scheme and produce nails and every building material, it is a programme of 250,000 to 300,000 houses every five years.
Let us assume that it was possible. Can this economy produce one million homes? We have allowed those things to go out without questioning. The public have held on to them and there seem to be dashed hope when in fact there was nothing to place hope on. Are we honest enough to engage with the public and say to them while should anybody who has no job legitimately expect to win a home?
“We have a culture where people expect that you give them money to go and build a house. A nation doesn’t prosper that way when incomes aren’t tied to roofs. Everybody’s job in the UK is tied to his roof. Our income sources are not tied to our shelters. That is the mortgage system which was what we tried to resuscitate under the Lagos HOMS scheme and it is working”.
What is government doing to ensure that customers of the DISCOS have choices and don’t just get stuck with one service provider?
Let us set the context again, we didn’t solve our power problems in 62 years. We privatized it now for three years and one month. Can we say we are seeing a reasonable result within the time frame? Just set the context. If you see a three-year-old growing a moustache, you must be worried. In specific answer, we will get to that destination because that is the ultimate destination where you can chose where your power comes from.
If they told you in 2002 that you could change your telecom subscriber and still retain your number, you will have said it was impossible. When they started, it was only voice and text, now we are watching movies on our phones. So, it will evolve. You must look at it within that three years context. Three years after GSM privatization, it was still a slow start.
So, it’s a process, but we must be very careful that we don’t hurt one business in order to kill it. The Manufacturers Association of Nigeria (MAN) took this up with me and I told them that the GENCOs and DISCOs, are part of the private sector they are concerned about. Should the house fall because they are going through some teething phase? We are thinking about those things.
The Niger Delta which is troubled is critical to development of infrastructure in the country
In terms of stability in the Niger Delta, it will be very helpful to the country if we had peace, if we had understanding, if those who are aggrieved find a cleaner platform for expressing their anger. Nobody wins.
First of all, more pipeline vandalisation just means more pollution. It means more damage to the ecology and to the environment. It means that even their guaranteed share of 13 per cent derivation is lower. It means that FAAC account every month will be poorer. It means that workers will find it difficult to get their salaries. We are also complaining that the exchange rate is widening. That is the major source of dollars. The oil price has gone up, we have to take advantage of the benefit, get more dollars with increased output and reduce the pressure on the economy.
Can the window on private participation in road construction be expanded to address some terribly bad Federal roads?
Of course. In Lagos for instance, Ajose Adeogun is an example. It was a partnership with Zenith Bank. Adetokunbo Ademola is an example; it was in partnership with Eko Hotel. We are planning to have an electricity consumer census because what the books show today is that only six million households use electricity.
Most federal roads are terribly bad, those were your words, I disagree sir. I disagree very seriously. This is an institution that owes the public accurate information. Most federal roads are not terribly bad. A federal road runs for hundreds of kilometres, but what we see is about 45 per cent failure. On a section of 100km, maybe sections of up to 10/15km have failed. In the East, there is a peculiar problem; it is an ecological problem of erosion coupled with some high-water table.
The unique nature of those roads does not necessarily transform to say all the roads in Nigeria are in the same condition as that of the East. Also, we must stop confusing a budget with cash; money hasn’t been voted for those roads. A budget is not cash, it is a statement of what you intend to spend and you have to earn it first before spending.
All that we have had in the last 10 years is that the capital budget has been below 20 per cent. It has been reported by this organization severally. So where was the money that was voted when we were spending more on recurrent expenditure.
The last administration budgeted N18 billion in 2015 for all Nigerian roads. As governor of Lagos State, the last budget that we did for infrastructure had over N200 billion and it wasn’t enough to solve the infrastructure needs in Lagos. Out of that N18 billion, I think all that they disbursed was about N9 billion. The budget for housing was N1.8 billion for the whole of Nigeria. And the disbursement was N700 million. And the budget for power was N5 billion. We have changed that with the budget of N286 billion for works in 2016, about N80 billion for power and N35 billion for housing.
For the last three years, contractors haven’t been paid in Nigeria. The first payment they are receiving in three years was in July 2016. How does that translate to where we are, the federal roads run for hundreds of kilometres, even if they have N2 trillion cash today, they can’t build the road in one year, it is man-hours and material deployment day by day. That is our reality.
On the Lagos-Ibadan expressway for instance, the relief you are seeing have cost us over N22 billion. That is what they have received. Imagine if that N22 billion has been released on an annual basis. We just lost time and I want to emphasise, this is this government’s first full year budget. It started late, so all the implementation you have seen is about seven months.
Clearly, there is promise on the horizon. We don’t have enough money, our choices are made by our realities, we want to revamp the economy. We can’t build every road immediately. The roads that drive our economy becomes important, what drives our economy, energy. So, you must build roads that help us to evacuate our energy resources. In this regards, Apapa-Oshodi, Lagos-Ibadan routes become major considerations, so also are the Ilorin-Jebba, Benin-Ore, Oyo-Ogbomosho, Sokoto-Minna, Enugu-Port Harcourt-Aba roads.
The former Federal Secretariat in Lagos is a wasting asset. And is your being a 3-in-one minister a challenge?
There was a policy in the past to dispose of those assets and the federal secretariat I recall was one of those assets concessioned to a private group. There is a presidential taskforce that was set up to manage the exercise. That taskforce reports directly to the president, not to me. On my portfolios, I didn’t chose myself.
For me, every time you get the opportunity to serve your country, as long as you are healthy enough to do the job and you have ideas to pass across, you must not shirk the opportunity. If you do, you lose your right to complain if things are not done well. It is also not correct that it is one minister doing everything. We have two ministers in that ministry. I have a Minister of State who work with me. I have two Permanent Secretaries, very experienced and hardworking. I then have directors and assistant directors.
I think it is important if a study was done about the role of ministers in other countries. I see my role as resetting the focus leading the team. Management, sharpening focus, renewing commitment and dedication is really the heart and soul of my work. I am not the one who will go and do the power. I am not an engineer. I deal with letters and files, responding to the public.
Finally, why is there a disconnect between the military solution and political solution in the Niger Delta?
In my ministry, I am an end user of petroleum product – gas. The point is that I do not have ministerial responsibility to deal with the problems in the Niger Delta. My experience is that people will never be angry forever. Anger dissipates after time. There have been very consequential conflicts in Yorubaland. It ended eventually and the end of that conflict ultimately signaled development for them.
The message clearly is that there wont be prosperity and development, which is one of the basis of anger. All of those who live in that region must understand this in their own enlightened best interest. It is not only about revenue for the country but even developmental programmes for the region.
We have developed the right energy mix for Nigeria, says Fashola