11 November 2016

Nigeria: Fashola - Govt Won't Cancel Power Sector Privatisation

Photo: Chris Kirchhoff/MCSA
(file photo).

The Minister of Power, Works and Housing, Mr. Babatunde Fashola, yesterday assured power sector investors that the federal government will not reverse the privatisation exercise.

The minister gave the assurance, while speaking during a panel session at the fifth EU-Nigeria Business Forum titled: 'Harnessing Nigeria's Potential for Economic Growth,' in Lagos.

Although the former Lagos State governor who did not mention the name of the person that made the call for reversal of the privatisation exercise that was done by the previous administration, he was apparently referring to a recent call by the President of Dangote Group, Aliko Dangote, on the federal government to reverse the exercise.

But Fashola stressed that the federal government would abide by the terms and agreement of the privatisation exercise.

"I have heard discussions about revisiting the privatisation of power assets. But honestly, I don't know what it means. I like those who make such argument to be specific. Let them come out let's have a discussion. Does revisiting mean canceling it? If it does, I don't support it.

"Investors who took the risk must have the assurance that the contract will not fail. And contracts that fail have so many consequences. I recall, shortly after I became governor, we privatised some refineries and a government came and cancelled it. So, we should stop this back and forth! That is my personal position and as minister that would be the position that I would canvass.

"I don't believe in revoking contracts. Let me be clear, the investment community is a very small community. They talk to each other every day, just like politicians meet at night. So, once they hear that you have cancelled one person's contract, they are going to call others to pack their bags and leave. So, this government will respect and uphold the contracts that it had committed to and if there are any disputes about those contracts, the umpire is the judiciary.

"But if those that talked about revisiting meant improving the governance, yes, I am for that. There must be stronger governance and controls and those are laws that we must enforce. And we have started that process," Fashola explained.

Furthermore, Fashola pointed out that as a result of the privatisation exercise, households and firms that consume electricity should always hold the Discos in their respective locations responsible for blackouts they experience in their areas.

According to him, the major role of his ministry presently is in policy formulation.

"For the avoidance of any doubt, the power sector has been privatised. Let us all understand that and that decision has its consequences. One of the consequences was that it changed the role of the ministry of power. So, as a ministry today, we don't buy meters any more, we don't supply transformers anymore. There are some old projects that we are trying to complete, so any procurement that we make, are to complete those projects that were started before the privatisation was completed.

"So, if you don't have power, it is your service provider you should hold responsible. The 11 Discos are the ones that should respond to that, not the ministry. So, people must understand this. It is the same way that we call our service providers when our telephones are not functioning, we don't call the Minister of Communication. I understand that this transition is just three years, but there must be that culture change. We must also understand that things take some time to manifest results. We have retained the transmission end of the business, so generation and production of power is not private.

"So, people must begin to understand what has changed because we are no longer directly responsible. So, for the purpose of clarity and understanding, the role of government through the Ministry of Power, Works and Housing, is policy making. What kind of energy is safe? What kind of energy is clean? Should we have more gas and less coal? That is our responsibility. Even regulation is not done through the ministry, it is done through NERC. The NERC is like a referee who can issue a yellow card to any player who tackles from behind. So, we (the ministry) are like FIFA," he added.

To this end, he urged contractors to stop bombarding his office with proposals, but to always channel such to the Discos and Gencos, saying there is a limit to what his ministry can do.

While urging the investors present at the meeting to stake their funds in Nigeria's power sector as well as in infrastructural development, Fashola noted that investing in schools, bridges, highways, road, transport, etc, is the sure path to drive economic growth.

Specifically, he urged the investors to consider investing in the country's rural electrification programme.

He said: "There is a significant part of our country that is not yet connected to the grid and they are in the rural areas. And if the initiatives to drive access to electricity must mean anything, then we must connect those people. So what have we done? There is a rural electrification policy. And this must be distinguished from the rural electrification implementation programme. In the last few months, we have developed that programme.

"Now, in driving that project, we have also said the programme would target specific sectors- education and agriculture - because it is a rural electrification project. I like to share with you, the anchor of the programme. We have decided to use our universities as the anchor. Most universities in Nigeria are usually cited in rural areas and government uses them to open up access to those areas.

"What we have done was to develop an energy for 44 tertiary institutions and they comprise 37 federal government tertiary institutions and seven indigenous operators. So, this is a project that you can invest in because we are ready, we have done the audit and we know how many gas plants we want to build. They would generate a combined capacity of 120mw of power, because that was what the audit revealed as the demand.

"This would replace 1,005 generators that we found in all these campuses and they were generating 210mw of unclean energy. So this is one area for investment. The preliminary cost that is needed to cover the capital expenditure, to cover the operation and of course maintainance is about $150 million. So, for me this is an example of what money can do if you think through and develop a plan."

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