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| Last Updated: Jan 19th, 2012 - 11:25:19 |
Analysis/Commentary
Appreciating Government’s power sector reforms
Aug 19, 2009, 17:18
| | Despite the great efforts of federal and state governments in Nigeria in the last one decade, there is certainly no greater source of frustration to any individual or institution in the country than irregular electric power supply. Everybody or everything is one way or the other a victim and at the mercy of the perennial shortage of electric power in the country.
Epileptic, irregular and insufficient power supply limits income-generating opportunities of the informal sector; it leads to increase in the cost of doing business for both informal and formal sectors; it compromises the operations of security agencies and paralyzes power-dependent social activities. In short, it saps vitality out of the national life of a modern society. Power (energy), especially in its electrical form, is required to fuel the machinery of socio-economic transformation and development. Without regular and sufficient supply of power, the dream of rapid economic growth and sustainable development would remain largely unrealistic.
Notwithstanding the indispensability of regular power supply to national development, epileptic power supply remains the ugly reality in Nigeria for several reasons. Firstly, Nigeria had no viable and workable energy policy for many years. So attempts to improve Nigeria’s energy situation were not guided by well-thought-out blueprints. Power supply has been largely bogged down by government monopoly and needless centralization of the processes of generation, transmission and distribution. Things were not done scientifically or systematically but in fits and starts.
Secondly, there was little or no investment in power infrastructure for almost two decades between 1979 and 1999. No new power facilities were built and the existing ones were abandoned or at best poorly maintained. This criminal neglect of capital-intensive sector naturally led to severe infrastructural decay.
Thirdly, inaccessibility or unpredictability of sources of energy such as gas, refined petroleum products, water and coal exacerbates shortage of electric power. Despite the resource endowment of Nigeria, lack of proper planning had led to either under-utilization or wastage of the country’s large reservoir of energy sources. It is a cruel irony that a country that lacks and needs gas to power its electric generation plants recklessly flares huge quantities of oil-associated gas.
Moreover, the energy crisis is compounded by the fact that the ever-increasing demand for energy for industrial, agricultural, transport, commercial and domestic uses owing to increasing human numbers, urbanization and increased industrialization has not been matched by the sluggish growth in power supply. The decade-long power sector reform that consumed huge manpower, material and monetary resources is yet to yield positive dividends for the country, its residents and corporate citizens.
Little wonder, the helplessness, hopelessness and frustration of most Nigerian individual and corporate citizens over the country’s energy situation.
Yet, Nigeria’s energy insufficiency and insecurity has persisted not because of lack of conscious efforts to turn the situation around. The civilian administration of former President Olusegun Obasanjo took a number of steps to overhaul and reform Nigeria’s power sector with a view to achieving at least 10,000 megawatts of electricity by the target date of December 2007. The Obasanjo administration engaged in a long and tortuous process of unbundling and restructuring of the erstwhile National Electric Power Authority as well as the privatization and deregulation of the energy sector. Among other things, the process led to the setting up of the Electric Power Implementation Committee (EPIC), the formulation of the National Electric Power Policy (2001), the drafting and enactment of the Electric Power Sector Reform Act (2005), the transformation of NEPA into Power Holding Company of Nigeria (PHCN) as well as the unbundling of PHCN into 18 units comprising six Power Generation Companies, an independent Transmission Company and 11 Distribution Companies. In addition, there was inauguration of the Nigeria Electricity Regulatory Commission (NERC) to serve as power sector regulator as well as the establishment of a Rural Electrification Agency to cater for the energy needs of the rural majority.
The conscious attempt to mainstream the private sector in the Nigeria’s drive for energy security, efficiency and sufficiency also saw the advent of Emergency Power Producers (EPPs), Independent Power Producers (IPPs), Private Power Producers (PPPs), and Build Operate and Transfer (BOTs) initiatives. As part of a National Integrated Power Project (NIPP), the Federal Government initiated 7 new projects located in various states in the Niger Delta. It is believed that some of the projects are yet to come on stream or function optimally because of non-completion or lack of connection to their gas sources of power. The reality is that the power sector is not only cost-intensive but also one with a long gestation period.
From all indications, past desperate efforts and good intentions have not translated to energy sufficiency or security in the power sector. As it were, we have witnessed plenty of motion without any leap forward. The fact is that we have had a lot of trial and error. There had been many shots fired into the dark without hitting the target. Giving vent to our national tendency for fire-brigade approach, we have thrown so much money, energy and materials at the power problem without arriving at a sustainable solution.
It is this reality that has informed the cautious, systematic, scientific but seemingly measured approach of President Yar’Adua’s administration to the challenge of regular power supply in the country. Realising that what is needed may not be doing more of the old things that achieved limited success in the past, the Yar’Adua administration has chosen to critically study and appraise the power sector before investing any further major resources. The ‘abiku’ syndrome of Nigeria’s power sector has obviously necessitated a comprehensive problem analysis before any major injection of funds. Well-meaning Nigerians who are desirous of energy sufficiency and security would do well to support and even advocate comprehensive power sector analysis with a view to determining the best options and ways forward.
Many years of power sector reforms should have brought us to the realization that there are no easy overnight solutions or quick fixes to Nigeria’s energy problems. We must explode past myths and answer difficult questions about energy resource utilization and management. Has Nigeria benefited from the undue centralization of power generation? Was the system not fraught with inefficiency and susceptible to abuse? What are the sacrifices that we must make if we truly desire regular power supply?
The challenge is obviously to get sufficient energy to more users in ways that are environmentally, economically and socially sustainable. This necessitates institutional development and structural reforms comprising pragmatic policies, legal and regulatory frameworks as well as capacity-building.
Following from this, those who genuinely desire sustainable regular power supply and enduring energy sufficiency and security must support government to make hard policy choices. There is a need for the mass media, opinion leaders and policy elites to build broad-based support for the outright deregulation and liberalization of the power sector. Market forces must be freed to stimulate investment and allocate resources in the power sector. It is wishful thinking to think that electricity can remain cheap and yet become regular and accessible to all.
Regular power supply cannot be without some sacrifice or inconvenience to those who must enjoy it. The private sector will not invest in the power sector if the energy tariffs are so low that there is no chance of cost recovery and profit-making. The Federal Government must to take the unpopular and politically-costly decision of removing subsidy on electricity thus increasing energy tariff in order to make the power sector attractive to private investors. Energy tariffs must go up initially to lure private investors into the power sector.
Only the massive entry of the private sector into the power sector can generate the needed momentum to guarantee regular supply and availability of power. Ultimately, competition between a multiplicity of power producers and distributors would promote efficiency and cost-effectiveness and eventually lead to increased affordability and accessibility of energy.
In responding to the growing electricity demand, there is an urgent need for Nigeria to diversify her sources of power and energy mix. We must shun undue reliance on hydro-electric and thermal sources of energy and consciously prospect into wind, geothermal, bio-gas, solar and other renewable sources of energy. Availability and exploitability should determine the preferred energy source for power production in any geographical zone. Given the huge amount of sunshine (source of solar energy) and other energy sources with which the country is endowed, there is no good reason for their non-utilization.
Moreover, rather than centralizing generation of power, we should create a policy environment and legal framework that allows small-scale power producers to generate energy and sell to the national grid. Decentralizing power production will allow all levels of government as well as the private sector to get involved in this all-important national enterprise.
Furthermore, given the precariousness of Nigeria’s power situation, there is a need for some drastic measures. It would not be asking too much if the federal government should task multinational oil companies to set up refineries and power plants with the possible incentive of initial supplies of crude oil and gas to such projects at discounted rates.
For now, there is a lot of inefficiency in energy production by government parastatals and agencies that makes cost-recovery difficult. This is what is responsible for the so-called high subsidy on energy. The current subsidy is more of premium being paid for the prevalent inefficiency and fraudulent practices in the power sector fostered by government monopoly. The mainstreaming of the private sector will hopefully bring competition and efficiency and remove waste and corrupt practices from the power sector.
Furthermore, Nigeria’s drive towards energy security would benefit from a culture of energy conservation. By embracing energy-saving architectural designs; use of low-energy consuming gadgets and bulbs; switching of unnecessary gadgets and bulbs as well as taking other energy conservation measures, we can reduce misuse and needless waste of our limited power supply.
Power production may be cost-intensive but it does not require high-technology beyond the intellectual capacity and managerial ability of Nigerians. We must support the Yar’Adua administration in its determined and titanic effort to wipe off the national disgrace of perennial crisis from a nation that is endowed with abundant natural resources as well as capable and experienced technical manpower.
Femi Ajayi is the Vice President’s Senior Special Assistant on Development Cooperation.
© Copyright 2012 nigeriafirst.org
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