Punch Managing power sector privatisation AUGUST 13, 2013 BY PUNCH EDITORIAL BOARD EPILEPTIC power supply is still the order of the day. System failure is rampant; “crazy bills”– that exclusively Nigerian device of presenting consumers with outrageous electricity bills for power they never consumed – and corruption in the name of power sector contracts, remain stubbornly in vogue. No wonder many are not excited by other developments in the power sector that, ordinarily, should elicit hopes of a less dismal future. But there is hope, notwithstanding the perfidy of officialdom and the puny reputations of the private firms that have won bids for state-owned power generating and distributing companies. This hope is hinged on resolving the twin problems of gas supply that arose from poor planning and the transmission lines, which is the primary cause of frequent outages. The latest missive from the privatising agency – the Bureau of Public Enterprises – is that successful bidders for the 15 GenCos and DisCos are expected to make final payments by September and assume control thereafter. About $2.6 billion had been paid for the 25 per cent of the bid prices of the firms by June. Bidding processes are well under way for the power plants located across the country under the National Integrated Power Project. The Federal Government also confirmed that it had commenced paying the final entitlements this month to 43,000 workers of the Power Holding Company of Nigeria, the state-owned monopoly from which 18 firms were unbundled, 17 of which were slated for privatisation. The sole transmission firm, Transyco, has finally been handed over to Manitoba Hydro of Canada, which will manage it on contract. But as we prepare for a liberalised electricity market, the BPE must be extra vigilant. We are apprehensive of the capability of some of the winning consortia, most of which lack proven track records in the sector. The rigged bidding ensured that Nigerian power brokers cornered them. Having failed to stand up to pressure from the top, the BPE can still redeem itself by closely monitoring and ensuring that the winning firms meet all the performance benchmarks specified in the transaction agreements. It should particularly watch out for, and prevent, asset stripping as witnessed in Ajaokuta and Daily Times of Nigeria, among other privatised government firms. The BPE should swiftly exercise the government’s right to revoke a sale the moment any of the firms cannot meet production, financial or technical targets. The power sector is too crucial to the economy to be trifled with by incompetent bidding firms. We can only hope that, at last, the Nigerian government is set to free up the power sector to private investment. The country has paid a high price for the state’s monopoly of power. Chinedu Nebo, the Minister of Power, says the government spent about $3.5 billion each year over the last 10 years, but has barely 2,000 megawatts in new generating output to show for it. This is the noxious effect of corruption. Since plans were first made in the late 1980s to liberalise the sector, public officials have been frustrating the plan and continue to gorge themselves on the lucrative contracts that service a system of graft. But even a government as unfocused as President Goodluck Jonathan’s has come to realise that time is running out. The 4,770MW capacity that the government now claims to have is a far cry from current national demand of about 15,000MW. On Saturday, there was a dramatic loss of 2,000MW, which resulted in outages. That many of the power assets will soon move into private hands is something to look forward to. Government has no business in today’s globalised economy in running business operations. For one, the billions of naira and the US dollars stolen from the public till through dubious contracts and on paying workers should end. Also to stop is the extensive system of patronage and nepotism that places incompetents at the helm of such a strategic monopoly. In welcoming the much-delayed privatisation, private sector organisations noted that the cost of providing alternative power had risen from 40 per cent to over 50 per cent of operating costs. Power outages are cited as a major cause of factory closures and the failure of small and medium scale enterprises in the country and, hence, an unemployment rate of 23.9 per cent. The BPE should speed up the sale of the seven coal blocks being managed by the Nigerian Coal Company, which it commendably plans to do to complement the power sector privatisation. As it goes ahead to sell a majority equity in the NIPP plants, the BPE should ensure transparency. We reiterate our preference for Western, Japanese and South Korean investors, whose proven track records are ably matched by anti-corruption laws in their countries that discourage involvement in corrupt dealings with Nigerian officials. For a country that is one of the world’s most corrupt, this is very important. Nigerian officials’ preference for Chinese and Indian firms that tolerate their corrupt ways as investors and technical partners is not surprising. The National Electricity Regulatory Commission should work with the government and the National Assembly to remove all statutes that inhibit investment and competition in the power sector. The lingering transmission and gas supply issues must be speedily tackled.
Posted on: Tue, 13 Aug 2013 08:18:46 +0000
Trending Topics
Recently Viewed Topics
© 2015