Exactly four years since 11 power distribution and six generating firms were handed over to some “private investors,” it is a bleak anniversary, rendered gloomier still for Nigerians and businesses by the missteps and disarticulation of the President Muhammadu Buhari government that does not know what to do with the mess it inherited. To avoid unmitigated failure, it must act fast and decisively within the remaining 19 months of its term to redeem the power sector and the economy.
Two recent pronouncements demonstrate its vexatious vacillation on this all-important industry. While Vice-President Yemi Osinbajo urged the majority stakeholders in the power distribution companies to recapitalise or sell equity, the Minister of State for Budget and Planning, Zainab Ahmed, said the government was considering reviewing the controversial power privatisation of 2013. Coming so maddeningly late in the day, the pronouncement still failed to convey the required urgency for action in a sector so crucial to economic revival.
There is no doubt that DisCos are the weakest link in the electricity value chain. But despite their abysmal failure to recapitalise, provide services or meet obligations to other sectoral segments within the system, Osinbajo’s homily to the clueless operators lacked the expected bite and did not convey the despair of consumers or the severe damage done to an economy crippled by inadequate and epileptic power supply. That this government has no definite road map to untangle the mess was obvious when as recently as September, Babatunde Fashola, the Minister of Power, Works and Housing, was repeating his mantra at a Lagos Chamber of Commerce and Industry gathering that the operating licences of the hopelessly incompetent DisCos would not be cancelled based on his jaded reasoning that it would send a negative signal to investors and further erode Nigeria’s poor global competitiveness ranking.
In other civilised climes, the fraudulent nature of the auctions would be sufficient to penalise offenders and promptly reverse the sale. Fashola’s legalism appears on the surface to be well-grounded, but dissipates when weighed against the fraud, the strategic importance of the power sector to national survival and damage to the economy. Powerful voices have since joined our long-running advocacy for a radical review of the privatisation and the urgency to separate most of the current investors from the DisCos. The tycoons, Aliko Dangote and Tony Elumelu, have been joined by the Lagos Chamber of Commerce and Industry and now, even Osinbajo, in the realisation that these operators have to let go to unleash the economy.
Government’s kid gloves treatment of investors who lack track record, technical and managerial expertise, financial capacity and transparency must give way to hard tackles. Since it says it will not inject funds into the DisCos, but prefers to sell its 40 per cent equity in them, it should explore all legal means to persuade the power sector misfits to part with all or most of their 60 per cent stakes. No serious investor will agree to take up a minority stake in outfits run by such failures.
Privatisation was meant to attract foreign and local investments, create jobs, stimulate every other sector of the economy, transfer skills and technology and make local products competitive by substantially erasing the over 40 per cent extra cost that the organised private sector says is added by the necessity of alternative power provision. Jonathan dealt Nigeria a deadly blow, but Buhari is failing to ameliorate it. Comparing Nigeria with our supposed peers shows how: a United States Energy Information Agency data reveals that in 2016, installed generating capacity in Brazil was 150,338 megawatts; South Africa 42,000MW, and Egypt 33,000MW. Nigeria’s installed capacity is 6,953MW, but highest daily output in October was about 4,600MW. This is too dismal for an economy experts say needs a minimum of 15,000MW.
Elsewhere, the World Bank cites Latin America and the Caribbean as examples where Performance-Based Regulation for setting multi-year tariffs and monitoring compliance with service quality standards by DisCos were effective. It identified Chile, Argentina and Peru as countries where privatisation led to greater efficiency, investment and competition. In Argentina for example, power generation post-privatisation, rose from about 13,000MW in 1992 to about 23,000MW in 2002. In our own case, it has moved us from darkness to more darkness.
Moving forward, we prefer the option of outright recovery of power assets from the worst performers and from those serving the industrial and commercial hubs of Lagos, Port Harcourt, Kano and Kaduna. There should be a thorough probe as well as a criminal investigation into the privatisation process: those found to have broken the law should be prosecuted.
The option of overwhelmingly diluting their shareholding should be forcefully presented to the DisCos. The power sector is too crucial for economic survival to be abandoned to clueless operators. The government cannot be helpless when national interest is at stake. We should learn from our mistakes: henceforth, the BPE should undertake targeted auction with preference for established global players and with reasonable PBR framework put in place and rigorously enforced.
Most importantly, Buhari has to move with utmost speed. Having wasted two years, there should be tangible results to present to Nigerians by 2019. The task should begin with getting the undesirables out and reviewing the fraud of 2013.