"The time for the review of contracts of Nigerian DisCos and GenCos is due."
From the unending spell of electricity outages in certain parts of the country to complete blackouts in other parts since late last year, the crisis bedeviling the Nigerian power sector has become deeply concerning. It has evoked the usual nauseating blame games among stakeholders in the power value chain. Businesses - small and large scale - have been ruined and social life thrown into jeopardy, while families are grating their teeth as the high cost of fuel to power their generators exacts a heavy toll on their lean finances. Most cannot sleep comfortably at night any more. The health implications are hazardous! Besides slowing economic growth and aggravating unemployment, the power situation is triggering security challenges nationwide. Robberies and criminal activities that thrive under the cover of darkness are gradually becoming commonplace.
The electricity distribution companies (DisCos) and Transmission Company of Nigeria (TCN) attribute the present low power supply to a slump in generation due to the shortage of gas supply to the electricity generation companies (GenCos). In Ibadan and parts of Ogun state and other areas, constant outages have been attributed to the criminal damage of power infrastructure, recurrent TCN maintenance work and energy theft.
This account belies the real issue, which the Minister of Power, Adebayo Adelabu, exposed at a meeting with stakeholders last week. Pointedly, he accused the DisCos of rejecting the power load given to them for distribution, thus throwing the country into avoidable darkness and utter anguish. It has been their long vexatious transactional model, arising from gross incompetence and ill-preparedness for the business, marking them out as the weakest link in the power value chain, as the minister described them; and rightly so.
Therefore, the minister warned them to improve their service delivery, or have their operational licenses withdrawn. The National Electricity Regulatory Commission (NERC) has been put on alert in this regard. Adelabu emphasised: "Willful refusal by any DisCo to take up available power is a qualified basis for the revocation of license too."
No country goes through spells of power outages as often as is the case in Nigeria and expects to be an economic success.
When the Power Holding Company of Nigeria (PHCN) was unbundled into 11 firms in 2013, it was thought to be the game-changer in the power sector, required to unleash maximal productivity, which in turn would impel rapid economic growth. Regrettably, the 'game changer' has turned out to be a farce. The unbundling of the power sector was supposed to guarantee that only players with the technical know-how and capacity to invest would be allowed into the arena. Incredibly, available power is still fluctuating between 3,000 megawatts and 4,500 megawatts since then, despite over N1.6 trillion interventions by the Central Bank of Nigeria (CBN) - a development some analysts considered an aberration for a sector that was supposed to have been fully privatised.
Arguably, deceit and the lack of transparency are embedded in the business templates of many of the DisCos, to the extent that they still dither on installing prepaid meters for their customers, preferring instead their addiction to profiteering by giving bills through the rule of the thumb. One of them said, barefacedly, a few years ago: "As investors, we need to look at where we are going and also consider whether the metering scheme will get us to where we are going. However, if it will not get us to where we are going, we will drop it." Truly, this has continued to define their conduct against what is the global best practice.
The DisCos' ill-disposition to the metering project explains why out of 12.8 million registered electricity customers in the country, only 5.7 million of them had been metered as of February 2024, leaving a gap of 7.1 million in over a decade. This is unacceptable. It promotes the weird monthly practice of "estimated billing" system, alluded to, which fleeces customers for power they did not consume; and motivates some criminally-minded elements to resort to power theft, which does not help the system either.
The predilection for overbilling in the absence of prepaid meters was writ large in the recent Abuja DisCo's advertised N923 million debt claim against the State House, Abuja, whereas the outstanding reconciled bill paid eventually was N342.3 million. Why the State House and 86 MDAs, said to owe billions of naira, cannot be on prepaid meters, exposes the underbelly of the distribution network's operations.
Under such warped business approach, an efficient and transparent system of debt collection from customers across Nigeria is lost. The net effect is the loss of revenue for their operations, inadequate resources or failure to pay the GenCos for power sold to them, and default in paying their heavy indebtedness to banks. The DisCos cannot replace obsolete or damaged transformers, poles, cables, fuses and other technical accoutrement, without illegal levies on communities with electricity repair issues. The GenCos are owed a staggering N1.3 trillion. This is an albatross for the power sector.
However, the current abysmal power supply is not new. It has been a routine malady since 2013. Three administrations have experienced the rot, namely: Goodluck Jonathan's regime, which sabotaged national interest in the privatisation; the Muhammadu Buhari administration; and now that of Bola Tinubu. Globally, privatisation is utilised in stimulating economies and attracting foreign direct investments. This was the public expectation a decade ago, but it was dashed here, as reputable international operators were not allowed to be part of the bidding process.
As it later became evident, local investors that had neither the financial capacity nor the technical know-how to bring the much-needed sea change in the sector emerged. They ran to our local banks for loans to start off their operations, which could not have been so with foreign investors. What followed was a struggle to service the monthly debts and pay salaries, and little or nothing was left to plough back into the business. Effectively, cronyism and official corruption trumped national interest.
It is here that the rain started beating the country in its desire for improved power supply. That mess has not been cleared up for a new order to prevail. In 2016, Buhari's address at the National Economic Council retreat alluded to mistakes made and their consequences: constant outages; high electricity bills; obsolete equipment, like transformers; power fluctuations and low voltage. Building gas powered plants in areas where gas pipelines do not exist simply typifies how not to govern and plan for the economy! Unfortunately, the Buhari administration did nothing to change the narrative until he left office.
Presently, the power sector is in dire need of FDI to revolutionise it. This is captured in the huge outlay of $900 billion in the National Integrated Infrastructure Master Plan for the next 30 years, which purportedly began in 2014. This implies an injection of $30 billion annually into the system. Neither the government nor our banks have such funds. This ought to be the playground of foreign capital. Therefore, the minister's long term plan for the DisCos to recapitalise is a non-starter, with their indebtedness to local banks already.
Arising from all this, the vacuity of the minister's threat to withdraw the licenses of errant DisCos is evident. One of his predecessors, Professor Chinedu Nebo had similarly heckled them on their non-performance on 24 November, 2014 with this note of finality: any culprit would be sanctioned "or its license withdrawn." Nothing happened! With the big masquerades involved, a minister or NERC has no power to beat them into line, where the political will is hollow as it has been since 2013.
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It is a big shame that an economy that prides on being Africa's biggest, is trifling with just 4000 MWs of electricity generation for over a decade. Nigeria's highest generation was 5,700MW in 2021, according to Adebayo, when South Africa, the second largest economy on the continent, generates 10 times more.
Having set up a Power Sector Intervention Fund in 2014, with an initial deposit of N300 billion, and gained nothing, as the prevailing woes exemplify; and with the subsequent unbundling of PHCN and yet the ugly beats go on, this disorder recommends a new Marshall plan. The $800 million Geometric Power plant in Aba, owned by a former Minister of Power, Bath Nnaji, with the capacity to generate and supply electricity round the clock, shows what a well-organised private sector initiative and capital can do. This investment paradigm is one of the ways going forward across the country.
The DisCos and GenCos are not the only ones challenged in service delivery. The TCN as a public concern still lacks the capacity to transmit power. Tested operators outside this jurisdiction should come in through a more credible round of privatisation.
With shortcomings in gas-powered thermal power configurations, alternative energy sources such as hydro, coal, solar and wind should be pursued vigorously. Every contract has terms of reference that must be adhered to. The time for the review of contracts of Nigerian DisCos and GenCos is due. It they are not measuring up, the government should measure up by being bold enough to terminate them. Nigerians and the economy need a breather. Power drives life.
