Nigeria’s Power Privatisation and Dangote’s Strange Counsel

Alhaji_Aliko_Dangote

When Africa’s richest man speaks, the world listens. Aliko Dangote has proved his mettle in business in one of the most difficult terrains in the world, by not only setting up businesses but turning them into multibillion naira organisations. Naturally, you would think Dangote would be pro-business in every way because of how much success he has achieved in business.

Naturally, you would think Dangote would be pro-business in every way because of how much success he has achieved in business.

However, his recent statement on the privatisation of power sector assets in Nigeria has come as a surprise not only to players in the power industry but to close watchers of the Nigerian business sector. Speaking as a guest lecturer at the Senior Executive course 38 at the National Institute of Policy and Strategic Studies (NIPSS), Kuru, in Plateau State, Dangote was quoted to have advised that the federal government reverse the privatisation of power assets in the country because in his words “the buyers lack understanding of the complexities of the sector.” Since the publication on 28 October, Aliko Dangote has not issued any statement denying it or clarifying his position. So it is assumed that he meant every word of what was published. First, I think it must be clearly understood that the power companies’ quest to turn the power sector around is mainly up against the peculiarities of Nigeria’s business environment.and not “lack of understanding of the complexities of the sector,” effort or strategy. A good number of the investors that acquired the power assets knew they were going into a very challenging terrain but were determined to make it a success. It must be noted that virtually all of these investors could not carry out exhaustive due diligence owing to the active resistance from the unions in the power sector. Some of the investors have since braved the odds to record ongoing transformation of the assets across the value chain; a feat that is widely acknowledged by the Federal Government, Bureau of Public Enterprises (BPE) and other stakeholders. Post privatisation has also come with its unique challenges. The transmission network is yet to be privatized and has not witnessed major investments to expand the transmission assets. Yet this is a critical component of the power value chain. The Transmission Company of Nigeria (TCN) only has capacity to wheel out at best between 3000MW and 5000MW. This means even where the generation companies are able to boost capacity above 5000MW; there is no transmission capacity to manage the increase. This is well beyond the control of the power firms. It is an issue the government and all stakeholders in the sector are working hard to address in a sustainable manner. There is also the critical issue of gas, which continues to take a hit from vandalism in the Niger Delta. Data from the Nigeria National Petroleum Corporation (NNPC) shows that vandalisation is at an all-time high currently. This year, crude and gas pipelines have been vandalised 1,800 times and each vandalisation impacts negatively on power supply. The strategic Forcados pipeline, which was attacked in February and just came back on stream this October, resulted in the loss of about 3000MW over the period the pipeline was down. But the most critical issue facing the power sector is the non-market reflective tariff regime. The current Multi-Year Tarriff Order (MYTO) – implementation has been suspended by a court order – was based on an exchange rate of $199 and an inflation of 8.79%. Today, the inflation rate stands at 17.9% and the exchange rate where it can be accessed officially at N305 to the US$. This simply implies that power companies’ cost of production is way above their revenue generation capacity. This is compounded by the fact that many federal government ministries, parastatals and agencies owe the power companies billions in unpaid bills. These are the realities of the Nigeria power market. Reversing the privatisation exercise will not solve these issues. Instead, it will set the sector back many years and dash any hopes that Nigerians will eventually see the light someday. The privatization exercise saw the participation of credible organisations – including the World Bank and some of its agencies – and remains one of the most important strides the nation has taken towards lighting up Nigeria. How would the government refund investors’ original cost of purchase and value of investments in the last three years which is estimated to be about $7 billion? Is Aliko Dangote seeking to buy the assets to add to his vast Business Empire? It is common knowledge that Dangote in collaboration with some partners put in a failed bid for some of the power assets. Could Dangote’s reversal call be a veiled attempt at a more successful ‘second coming’ for his power sector ambitions – having recently called for the sale of some government owned assets? It is noteworthy that the BPE has since faulted Dangote’s ‘counsel’. In a recent statement, BPE Director General, Dr. Vincent Akpotaire said: “My take is that we need to evaluate statements before we make them. That is the point I think we should put across to Nigerians. We have put only about three years since the handover of the power sector to private investors. Before that, the power sector had existed for well over 50 years and in those 50 years, hardly much was achieved due to several factors and the decision to privatise was a well thought-out decision.” The BPE helmsman couldn’t have said it any better. Dangote is a great man but in this case, he got it totally wrong. The only outcome from Dangote’s counsel would be the decimation of all the gains that have been made in the power sector, post privatization. Yes, there are still hurdles to be crossed; but reversing the process is certainly not an elixir to the current efforts aimed at giving Nigerians a stable, sustainable and reliable power sector. Nigeria needs to match her desire for a vibrant power sector with a commensurate commitment from all stakeholders to tackle the sector’s challenges strategically and sustainably. Perhaps, we could start by making the power sector the focal point of the government’s attention for the next one year. Fix power and watch Nigeria soar.

Source: Vanguard

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