The beleaguered electricity sector in Nigeria is down another rabbit hole. The first rabbit hole being the power sector privatisation under former President Goodluck Jonathan, referred to as the unbundling of the power sector. Existing generating plants and distribution network was carved up and sold to all and sundry. Transmission was left in government hands. This hogwash was to be run on a singular unfit for purpose power grid.
Jonathan’s privatisation was heralded as a win, comparable to the telecoms success. A few doubted but we kept mute, not this time around. Prior to 2012, American original equipment manufacturer General Electric had set up an office in Nigeria to participate in the coming privatisation of the power sector, but was disappointed and scaled down its expectations.
What are the issues with the Jonathan’s privatisation of the Nigerian electricity sector? By splitting the electricity delivery chain such that the final user of electricity is far removed from the producer, unlike the direct contact a telephone user has with a telecoms service provider. An electricity generating company has no contractual obligation to the consumer. The supply chain from gas, or whatever fuel procurement, to distribution should be under one Chief Executive Officer, a Field Marshal in a singular company. Mike Adenuga has acted as a Field Marshal in GLO and Aliko Dangote in his cement business.Â
The Grid, the grid is moribund and Siemens has been unable to revive it despite the posturing of Buhari administration since 2018. This grid is to evacuate 25000 megawatts this 2025 but it collapses on evacuating 5000 megawatts. This decrepit grid has given the Gencos and Discos the opportunity of passing the buck. While Ethiopia has operationalised its mega dam, Nigeria’s Mambilla mega dam remains a figment of imagination, mired in corruption. With this track record of a quasi privatisation any surprises the 2012 unbundling hasn’t delivered?
The Electricity Act EA of 2023 signed into law two years ago by President Tinubu is yet to move the needle, in fact it cannot move the needle. Here are my reasons for this position. The main thrust of the EA is a devolution to state governments rather than to private operators as obtained in telecoms sector. Electricity providers will have to go through another layer of state government bureaucracy before delivering power to end users. Similar to what happened in the 2012 unbundling.
The reputation of state governors is well known. A state governor chased Aliko Dangote out of his State because Aliko did not dance to his tune. After all governors have to recoup their electioneering expenditures. With the EA, governors have been given another source of dividend payout on their election investments. Serious investors would be weary of talking to these governors as their reputations precede them. Though signed contracts with the state regulatory boards, a new governor can dishonour it and send in bulldozers.
From one regulatory body, Nigeria has thirty-eight, including the Federal Capital Territory regulatory board. An investor will find it onerous to deal with more than one regulatory body before moving on to his potential customers. I have always posited that if APC had handled the telecoms privatisation it would not be this successful, story for another day.
Moreover the customers of electricity providers are not state boundary compliant. Industries in Lagos and Ogun State into Oyo State illustrate this situation. Potentially four different regulatory boards to deal with.
Why are states rushing to set up regulatory bodies rather than get electricity generation going in their domain? They set up regulatory hindrances to regulate what is not yet available. They can not set up generating companies because they lack the finance. They also lack capable human resources to man regulatory bodies. These boards will be filled with politicians and family members, square pegs in round holes. The nation ends up with what philosopher Ayn Rand wrote, ‘….when those who produce nothing are put in charge to push around those who produce, know your nation is doomed’ story of Nigeria. Serious investors are not coming into these shark filled waters.
This electricity reform is ending up being motion without movement. Fortunately, there is another way, and it’s possible to retrace steps taken. We should not do things the same way and expect different results, the 2023 act is doing things the same way by transferring what obtained at the federal to the states. In Nigeria, we have flipped the script, giving the grid priority over positioning electricity generation close to demand. Grids are created to take excesses not take inadequate supply and try to redistribute.
With this in mind, Nigeria should piggy back on industries that have independent power plants and have exited the national grid. These industries can create subsidiaries to provide electricity at a profit to nearby cities, towns and smaller industries. Earlier in our history Jos township was serviced by a private provider who was primarily in the business to provide electricity for mining operations. There is also the Geometric example in Aba, Abia State that no one is considering, has it failed?Â
This option is unlikely to fail because in powering their industries the new players in the Nigerian power space have an industrial base from which to take off and become major power companies. Aliko Dangote’s industrial estates come to mind. So does BUA industries. Both groups generate in excess of 3000 megawatts and have working relationship with the likes of General Electric and Siemens. Within three years they can be up and running if Aliko Dangote and Abdul Samad Rabiu and the likes are given the marching orders. To these two add Adeleke Group’s 1250 megawatts meaning Nigeria has three men generating close to what the national grid has capacity to handle.
Unfortunately, the 2023 Electricity Act has blocked progress along this option. Manufacturing industries generating captive power are leaving the power grid but are prohibited from providing electricity to third parties contiguous with their location. This path would cut extensive power evacuation lines and the attendant power loss. With more players coming in microgrids develop to take up excess generation. These microgrids are integrated into a new national grid which can later be connected to subcontinental grids.
This time the Nigerian power grid is built from ground up rather than top down as obtains.
Solar power to the rescue? This is a limited solution because solar panels can power homes but can’t power industrialisation. Mega power stations fired by coal, gas or hydro are needed to meet base power needs. State governments should focus on getting generating going in their states rather than desire to regulate what is not available thus creating another group of licensing rajs.
Olugbenga Jaiyesimi can be reached via jerry3jaiye@gmail.com 08123709109
