31 July 2012

Nigeria: Lingering Issues in the Power Reform Process

Chineme Okafor writes that last week's protest by electricity union members against the takeover of the Transmission Company of Nigeria (TCN) by Manitoba Hydro is a pointer that there are still challenges yet to be addressed in the power sector reform process

Nigeria's aspiration is to become one of the top 20 economies of the world in the next eight years, 2020, as encapsulated in her economic blueprint tagged Vision 20:2020. One of the key requirements for attainment of this set target is adequate electricity supply, which can only be achieved through the ongoing reforms in the power sector.

Industry analysts are however concerned that achieving steady power supply in Nigeria is still beset by challenges, one of which is the unending faceoff between the power ministry and electricity unions. It is also feared that given the protests that greeted last week's attempt by Canada's Manitoba Hydro to assume management of the Transmission Company of Nigeria, there is no guarantee that subsequent privatisations would be hitch-free.

Stakeholders have found it difficult to understand the rationale behind the lingering disagreement between government and the labour unions after over 18 months of negotiations and why the power ministry has been unable to resolve these issues that remain major threat to the reform process.

Their position is that when government fails to adequately address issues that threaten its reform programmes and other developmental projects, when they come up, questions are raised as to whether government has the capability and political will to push through such programmes.

TCN Transfer

Just last week, the execution of management contract for TCN, was seriously resisted by members of National Union of Electricity Employees (NUEE). The management deal between the Canadian firm and the Nigerian government was signed on July 23, 2012, after the foreign company emerged winner in a competitive bid superintended by the Bureau of Public Enterprises (BPE) and ratified by the National Council on Privatisation (NCP).

Under the terms of the contract, Manitoba is to bring in about eight expatriate managers to run the transmission company for a period of three years in the first instance. But the new management takeover had been resisted by the NUEE whose members barricaded PHCN corporate headquarters in Abuja, ostensibly to prevent the new managers from assuming duties.

The workers, who staged a three-day long protest that attracted heavy security presence at the headquarters, which also houses TCN, claimed that government was yet to fulfill its agreement reached with them during the Hassan Sumonu-led arbitration panel, which was setup to iron out conflicting areas between both parties in the reform process.

The union claimed that part of the agreement reached with government was that no one would be allowed to take over any of the 18 companies created from the unbundling of PHCN until outstanding labour issues bordering on the payment of severance packages, among others issues are sorted out. They threatened to continue the protests until their severance and other negotiated benefits have been paid.

While the union insisted that government had gone ahead with the management contract for TCN in flagrant disregard for the purported agreement, Minister of Power, Prof. Barth Nnaji, had maintained that there were no basis for the protests and clarified that TCN was not being privatised but was contracted out to improve its efficiency in anticipation of its critical role in the electricity supply chain. He clarified that the TCN workers' non-inclusion in the payment of severance package was because of TCN's non-privatised status.

He also explained that government and labour unions in the sector were close to reaching a final agreement on the conflicting issues and would soon arrive at a common ground.

TCN is one of the successor companies created from the unbundling of PHCN. It combines the functions of a transmission service provider, system operator and a market operator, all of which are central to the sustainability and development of the electricity sector.

The NCP had on March 26, 2012, approved that Manitoba moves into the next stage of the privatisation process. Consequently, an agreement for a N3.72 billion ($23.72 million) transmission management contract was signed between the company and the government on July 23. Manitoba, which was founded in 1961 is reported to be a major supplier of electric power and natural gas in the province of Manitoba, Canada, and presently operates 15 interconnected generating stations.

The company has more than 527,000 electric power customers, and 263,000 natural gas customers with a total of 9,089 kilometres of transmission lines throughout the province of Manitoba.

Lingering Issues

But some experts who commented on the development are of the view that government and the unions have failed to manage their differences sufficiently and noted that the breakdown in dialogue was a major threat to the power sector reforms.

Precisely, President of the Nigerian Association of Energy Economics (NAEE), Prof. Adeola Adenikinju, who spoke to THISDAY, faulted the current sour relationship between labour and government and posited that unless the parties opened up communication channels that are devoid of suspicion and that can sustain negotiations, they might as well make a mess of the power reform exercise.

"You see, government and labour would have to come to a realisation that Nigerians are desirous of seeing this sector work and so their actions will either make or mar the process. The BPE has released its revised timetable for the conclusion of the exercise and it shows that by October this whole process should be winding up. But it beats my imagination that up till now government and labour are yet to come to a conclusion on their disagreements," he said.

He further noted that part of the problem was that the unions were sceptical that they might be given the same kind of treatment that was meted out to workers of the defunct NITEL and are thus insisting that their demands must be met before the privatisation deals are sealed. "Labour is skeptical that they may be given the same kind of treatment that was given to the defunct NITEL workers and thus are insisting that they want this and that done before they can let go.

"Government has equally said that it has met most of their demands and will do more as agreed but the disagreement continues to linger, which to me is a big threat to the reform exercise. I think if at this stage of the reform, if government and labour are yet to agree, then I would suggest that an independent confidence building measure which would involve private sector stakeholders who really need this reform much more than you can imagine should be allowed to step in to move the reform exercise forward before we get stuck," Adenikinju observed.

Assessing the progress of the reform exercise so far and the capacity of the Nigerian Electricity Regulatory Commission (NERC) to effectively regulate the emerging sector in view of the previous staff-mix assessment of the commission by the World Bank, Adenikinju said: "So far, I think we are making progress except for the initial decision by BPE to revise the timeline, although they did explain the reasons for this and then the outstanding government-labour brouhaha."

He said the staff-mix assessment of NERC by the World Bank had revealed that the commission was lacking in some relevant staff requirements to effectively regulate the emerging market structure, but would not confirm whether the issue had been addressed by the commission. He however noted that addressing the issues would do the sector a whole lot of good to have an effective and transparent regulator.

The general consensus among industry watchers is that if the privatisation of the unbundled unit which is expected to wrap up in three months, when the preferred bidders for the 17 successor companies would be announced by the NCP, is still enmeshed in disagreements, there is therefore urgent need to resolve these issues with dispatch, before the power sector reform programme run into hitches.

Copyright © 2012 This Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.