inaugural speech as Nigeria’s new President on May 29,
President Muhammadu Buhari expressed worry that
Nigeria’s economic woes were traceable to her poor power
He also said it was embarrassing for the country to have
spent huge resources in restructuring the sector without
any real returns on the investments so far made.
change, the president said: “No single cause can be
identified to explain Nigerian’s poor economic
performance over the years than the power situation. It
is a national shame that an economy of 180 million
generates only 4,000MW, and distributes even less.
“Continuous tinkering with the structures of power
supply and distribution and close on $20 billion
expended since 1999 has only brought darkness,
frustration, misery, and resignation among Nigerians. We
will not allow this to go on. Careful studies are under
way during this transition to identify the quickest,
safest and most cost-effective way to bring light and
relief to Nigerians.”
With these, Buhari’s task to Babatunde Fashola,
who was last week assigned to manage the
country’s power sector as its substantive
minister can be said to be precise.
ambiguity, the president indirectly made known his plans
for the sector, which pundits say is still struggling to
cope with standard practices of a privatised market,
thus giving Fashola the job of quickly, safely and
economically delivering electricity to Nigerian homes
But for Fashola to achieve this, stakeholders would want
that he comes to understand the sector as an interlaced
value-chain; one which its synchronism determines its
These stakeholders reasoned that it is necessary that he
adopts a holistic approach in dealing with the
challenges of any of the sector’s pieces: generation;
transmission; and distribution, in view of the fact that
none operates in isolation.
For power generation, stakeholders who have repeatedly
asked for Nigeria’s expansion of her energy mix to
include other sources like her abundant solar; wind; and
biomass are of the view that the minister should expand
and drive further actionable conversations on these.
They in this regard, asked that past policy documents on
renewable energy development should be reviewed and
deployed to attract investments in the renewable energy
In addition, they also requested that existing projects
like the 10 megawatts (MW) Katsina Wind Farm which is
reportedly 80 per cent finished; the controversial
1030MW Mambilla hydro power plant; 750 Zungeru hydro
plant and other small hydro power projects which are
being held back by either human or institutional
circumstances, be freed to add to the country’s
According to them, further expansion of the country’s
energy mix to increase the ratio contributions of
non-gas sources to the generation capacity would be a
win-win for the country especially considering the cost
of transmitting energy from far-flung thermal plants in
southern Nigeria to homes and industries up north.
The national president of the Nigerian Association of
Energy Economists (NAEE), Prof. Wumi Iledare had
recently advised that the government should dedicate
priority attention to unlocking the country’s huge
potentials in solar, hydro and wind energy.
Iledara stated that endemic corruption, poor assets
maintenance, inadequate gas supply to thermal generation
plants, transmission infrastructure challenges, and
inconsistent government policies have all contributed to
the poor state of electricity in Nigeria.
He however noted that the country can make a quick
turnaround in its power systems by adopting such quick
and cost-effective models which renewables offer.
“Until we are able to resolve the huge electricity
deficit of the country, huge potentials of the economy
would remain untapped and unavailable to current and
future generations,” Iledara said
at the occasion of the ‘2015 World Energy Day’ in Abuja.
Likewise on generation, other stakeholders have
requested that the new conversation on embedded
generation which the Nigerian Electricity Regulatory
Commission (NERC) recently initiated to majorly serve
industrial clusters across the country, be vigorously
pursued by Fashola to at least, guarantee off-grid
stable supply to the country’s industrial sectors.
For existing thermal generation plants, which currently
account for 80 per cent of the country’s on-grid power,
stable fuel supplies and prompt payments for power
generated and sold have been identified as the key
challenges, which Fashola should tackle to keep their
supplies coming with minimal hitches.
Fashola will in this regard, stimulate and sustain a
harmonious working relationship with the ministry of
petroleum resources and the Nigerian National Petroleum
Corporation (NNPC) which provide almost all of the fuel
used in these thermal plants.
Prior to now, such relationship was the missing link
when the last administration of President Goodluck
Jonathan struggled to elevate its power reform programme
beyond its first phase into the transitional electricity
When the former administration eventually managed to
link gas supply to power plants, it was reportedly quite
late and too little.
In view of the past experience, stakeholders have
advised that Fashola should in his first priorities for
the power sector, set out his best foot by establishing
a steady link between gas supplies to these power
plants, especially those constructed by the Niger Delta
Power Holding Company (NDPHC) Plc under the National
Integrated Power Projects (NIPPs).
These projects stand to give the country quick wins from
their capacities but gas supply held back closure of the
“The new minister of power should try to get to the root
of the issue of gas production and appropriate pricing
and delivery of gas to all the power plants in the
country, and then the transmission infrastructure of the
country. That is electricity transmission infrastructure
of Nigeria,” energy expert, Dan Kunle advised.
Kunle, who worked in the economic team of former
President Olusegun Obasanjo, further said: “I will
advise the minister of power to separate the domestic
gas obligation from the export gas production and now
ask the president to approve a subsidised price for
domestic gas supply.
“This means that if domestic gas needs one billion cubic
feet of gas per day to meet the demands of such domestic
industries like electricity; fertilizer; cement and
other heavy gas users in the domestic economy, the
government can give a special price for this domestic
gas because in economics, you use what you have to get
what you want.”
“So, the minister should face gas availability and
supplies and tackle it and then transmission because
these two are extremely critical to stable electricity
in the country,” Kunle added.
Having retained and managed the country’s transmission
network in the reform exercise, the federal government
has continued to deal with the challenges of attracting
and deploying practical funding to upgrade the country’s
The Transmision Company of Nigeria (TCN), which is
currently under a management contract by Canadian firm,
Manitoba Hydro International (MHI) has however not fared
as well as expected by the stakeholders, thus raising
doubts on its capacity to deliver the goods.
As at the last count, the government said that
approximately $2.7 billion would come the way of the TCN
from sources that include bilateral partners to fund its
transmission expansion projects.
The government noted in this regard that such funds have
come in the form of loans from the World Bank-$700
million; JICA- $200 million; African Development Bank (AfDB)-$370
million; as well as the expected $1.65 million proceeds
from the sale of NIPPs plants; EXIM China’s $500 million
and other contractor financed turnkey projects worth $1
Unfortunately, the board of TCN is yet to get its act
together. Since the appointment of a chairman and some
initial board members was first announced some months
ago, so much time appears to have been lost internal
squabbles. If TCN does not deliver the goods in 2014,
there will be a crisis of sorts when the 10 NIPP power
plants come on stream.
Responses from industry stakeholders on the status of
TCN indicate that not much has changed since then,
hence, the need for Fashola to also look in closely on
TCN and the transmission network.
“The transmission should be possibly handed over to at
least two serious groups from China in the form of long
term concession of Build Operate and Transfer (BOT), so
that they can sit down and design for us very functional
transmission system which they can manage for maybe 20
years and transfer back to the government,” Kunle
proposed as an alternative to the preference of some
On distribution, stakeholders indicate that nothing much
other than helping the distribution companies cut
technical and commercial losses to minimal levels would
They in this regard asked that relevant institutions
such as the Nigerian Electricity Regulatory Commission (NERC),
the Nigerian Electricity Management Services Agency (NEMSA)
and the Nigerian Bulk Electricity Trading Plc (NBET) be
strengthened to continue to undertake their
For NERC and NEMSA, both of which are saddled with the
task of regulating and checking standards in the
industry, stakeholders have called for further
insulation of both agencies from potential political
interferences. This request, they said is based on the
known consequences of political interference in
regulation of critical industries like power.
Accordingly, making sure that the distribution companies
stick to delivering in their respective metering plans
to upgrade scientific revenue collection from consumers
as well as cut commercial loses, should also find a
place in Fashola’s itinerary. He in this regard can
breathe down on the neck of NERC to sit up and follow
through the Discos’ adherence to the performance
indicators it has given them on metering.
In strengthening key institutions in the power sector,
stakeholders especially the Discos also indicated that a
firm move to reconcile extant differences between NERC
and NEMSA would add value to the government’s reforms in
Other auxiliary issues
In addition to these tasks, getting the country’s
privatised power sector to a financially stable state
should also form part of Fashola’s agenda. The sector is
in a dire financial strait owing to poor revenue
There are strong indications that the sector is unable
to make payments for power generated and distributed,
thus impeding its progress and final transition into a
reliable market. The NBET which guarantees supply
payment through its various instruments is being owed
energy and capacity payments by Discos whose remittances
have dropped below expected thresholds.
The minister would have to, in partnership with relevant
sector participants and operators, explore creative
means of improving the sector’s revenue intake through
proactive metering of electricity consumers across the
country. Proactive metering is one aspect of the market
that the Discos have failed woefully, and even with the
provision of stop-gap funding from the Central Bank of
Nigeria (CBN), the situation has rarely improved, thus
contributing immensely to the sector’s revenue
Extant private power projects like the 450MW Azura
independent power project in Edo State which the
government has promoted by sealing its support for a
World Bank’s $237 million Partial Risk Guarantees (PRG),
should also be encouraged, along with plans by Zuma
Energy to build a 300MW coal power plant in Kogi State.
The World Bank guarantee on Azura comprises a debt
mobilisation guarantee capped at $117 million and a
liquidity guarantee capped at $120 million.
The combined value serves to leverage a total investment
in the power plant of more than $900 million made by a
set of 20 international banks and equity finance
institutions drawn from nine different countries.
The government in this regard should continue to inspire
the confidence of such investors with continuity of its
reforms in the sector.
The execution of the Azura PRG comes on the back of the
release of the government’s Solicitor General’s legal
opinion confirming the validity of the Put-Call Option
Agreement that was signed last year by the government,
Nigerian Bulk Electricity Trading Plc (NBET) and Azura
NBET has also signed off its pioneer Power Purchase
Agreement (PPA) for coal-to-power generation with Zuma
Energy for the coal power plant in Itobe in Kogi State.
The development serves to signal the country’s
continuous opening up of its power sector which Fashola
should leverage on.
Again, helping the country nurture its foray into other
energy mix such as solar, wind, biomass and small hydro
to upgrade access to power by the country’s rural
population should also take up Fashola’s attention. The
NAEE had noted that more than half of 75 per cent of
Nigeria’s 170 million people who have zero or minimal
access to electricity are within the rural areas of the
The minister should have this in mind and push for
strong policy actions on embedded power generation and
distribution especially using medium and small hydros.
These energy sources are found in Taraba, Kaduna, Benue
and Cross River States with estimated capacity
generation of 4,650MW.
News Source =>