Senate President Ahmad Lawan’s recent declaration that Nigeria was losing $29 billion annually as a result of poor power supply should not be hastily dismissed as a mere lamentation of helplessness, but should be seen as a pungent reminder of the gargantuan challenge confronting the country in that vital sector of her economy.
It should be taken as a clarion call for an urgent and decisive government intervention to turn things around in the ailing power sector.
The country has lost her competitiveness in many areas of the economy because electricity, in days when it is available, only lasts for a few hours.
Damage to the economy is most obvious in the manufacturing sector, where 40 per cent of the cost of production goes into the provision of electricity, according to the Manufacturers Association of Nigeria.
Worst hit have been the small and medium enterprises, many of which have had to fold up, as they cannot afford the cost of running their companies on diesel-powered generators, which have become the main source of power supply.
A Bloomberg report, quoting Dalberg, a global policy and advisory firm, said last year that Nigerians spent a whopping $12 billion a year to keep about 22 million generators running.
A World Bank Enterprise Survey published last year indicated that 322 companies closed shop between 2009 and 2014 in Nigeria, while 136 more were reported to be at the risk of closing down, from the 5,833 surveyed.
The textile industry, once the largest private sector employer of labour, has almost completely been wiped out. Although power is not the sole reason for companies closing down, it is no doubt a major reason.
“Lack of access to electricity and unreliable electricity are key constraints to doing business in Nigeria,” a Bloomberg report quoting the IMF said last year.
The corollary has been a massive loss of jobs and a high unemployment rate, which have been aggravated by the COVID-19 pandemic. Figures from the National Bureau of Statistics put the employment and underemployment rates at 21.1 per cent and 20.21 per cent respectively. Aljazeera says Nigeria’s youth unemployment rate is 55.1 per cent.
There is no way the country can power herself out of this gloomy economic climate without regular and efficient power supply. It can be said that lack of regular electricity supply has been the main reason Nigeria has assumed the unenviable status of the extreme poverty capital of the world.
Yet, government’s efforts to tackle the power chokehold on the economy have so far failed to produce the needed results. In fact, the boldest and most radical step taken was the privatisation of the power sector in 2013.
But it has failed woefully to bring succour to power consumers, thus fuelling calls for the reversal of the ill-fated privatisation.
The main snag was that the process lacked transparency as the power firms ended up with some unprepared investors that lacked the wherewithal to run the firms.
All that the power sector needed was a massive injection of funds by foreign investors with cognate experience in the power industry.
But some Nigerians raided the local banks for loans to buy the firms and are now in no position to invest fresh funds in the upgrade of the prostrate power distribution infrastructure.
All across the chain of power generation, transmission and distribution, there has been an absolute lack of investible capital to bring Nigeria up to the level of her continental rivals, such as South Africa and Egypt.
While improvement in Nigeria’s generation capacity in the past few years can be described comparatively as minuscule, moving from about 5,000 megawatts before privatisation to around 12,000MW now, South Africa boasts a generation capacity of over 52,000MW.
Worse still, of Nigeria’s 12,000MW, only between 3,000MW and 5,000MW can be delivered to its 200 million population. Any attempt to wheel more would be courting a system collapse, due to the ageing grid. At the same time, even the little that is available is wasted because of the DisCos’ habit of rejecting allocated power.
Aside from these niggling problems, there is also the challenge of a heavy burden of debt, especially the DisCos’ indebtedness to the GenCos and TransyCo.
Because the DisCos, which interface with consumers on behalf of the other members of the power chain have refused to remit revenues collected, generation companies have not been able to pay for the gas needed to keep power generation going, leading to gas suppliers threatening, every so often, to stop supplies. As of 2018, DisCos’ indebtedness to the other power firms was estimated at N859 billion.
The Nigeria Bulk Electricity Trading Plc, which buys bulk electricity from power generating companies through power purchase agreements, is also said to be owing N119 billion for electricity generated in the first three months of this year.
There has to be a way of ending this cycle of blame and ineptitude that has continued to hold the country down. According to the President of the Senate, about N1.8 trillion of public funds has been released to the DisCos, without solving any problem.
Despite their inefficiency and lack of service delivery, all the DisCos do is to chorus the need for a “cost-reflective tariff.”
The government, with its substantial interest across the power chain, still has a big role to play in restoring sanity, which is why it has brought Siemens, a recognised global player, into the fray.
The World Bank’s injection of $750 million “to improve the reliability of electricity supply, achieve financial and fiscal sustainability, and enhance accountability” may mitigate the excruciating liquidity crisis in the sector.
It is part of a $3 billion loan granted by the bank in 2019 for the expansion of the transmission and distribution networks, scheduled to be provided in four tranches of $750 million each.
The rigged privatisation should be reviewed. Certainly, the power sector crisis goes beyond just massive infusion of money.
The Federal Government should reassess the managerial behaviour of the Discos’ operators. The electricity distribution networks that deliver power from transmission networks to industrial, commercial and domestic customers are financially weak, managerially inept and technically incompetent.
The five year-year performance agreement, which was due for review in December last year has to be revisited.
The power sector should be made to work and there is no better time for that than now that the country is faced with an enervating economic crisis brought about by the low prices of oil and the deadly COVID-19 pandemic.