Fixing the broken pieces of Nigeria’s electricity market – 1

By Okafor Akachukwu 13/03/17

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Nigeria’s power sector is broken, collapsed and needs fixing as many power sector headlines in the past few weeks have suggested. In this year alone, a Punch January 22 caption reads “[Nigeria’s] Power System Collapses Four Times in Five Days”. A THISDAY caption on the same January 22 says “The Perennial Power System Collapse” Two days before January 22, ESI Africa reported that “Nigeria’s Electricity Generation keeps Plunging”. On January 12, Guardian reported, “Power generation drops by 207.1 MW on gas shortage”. The trend of the reportage indicated no improvements which must have necessitated Abuja Electricity Distribution Company (AEDC) to make appeals to their customers over the disrupted power supply. The Ibadan Electricity Distribution Company (IBEDC) had to issue a statement to blame the Transmission Company of Nigeria (TCN) for the power cuts. On January 27, ESI Africa reported that electricity consumers in Onitsha choose to issue the Enugu Distribution Company with a 21-day ultimatum to improve power supply and also install prepaid meters. Then on January 27, ESI Africa reports that the sector regulator – Nigerian Electricity Regulatory Commission (NERC) is seeking government subsidy to rescue the power sector. Very recently on February 7, during a National Assembly workshop on power the President of Senate, Dr Bukola Saraki was quoted to have said that Nigeria power sector was on the “verge of total systemic breakdown” which he attributed to the sale of power Distribution Companies (DISCOs) to individuals and parties who had “no idea about running a proper power distribution business”. The power sector is not on the verge of a total systemic breakdown, it has actually broken down and failing further.

The failing of the power system/electricity market depends on who you ask, when and where. The DISCOs would blame the Transmission Company of Nigeria (TCN) for not allocating them adequate power to serve the customers as well as some of the customers for electricity theft and billions of unpaid electricity bills by both government and private. Government and GENCOS (Generating Companies) blame inadequate gas supplies to thermal plants for low power generation. TCN blame GENCOS for low power generation to transmit to DISCOS and Nigerian Electricity Supply Industry (NESI) for billions it owes it. National Electricity Regulatory Commission on its own thinks that a review of the electricity tariff is due to ensure that tariffs are cost reflective and that the sector is in need of subsidy from government. Some politicians and technocrats think that the privatization of the sector needs to be ‘reviewed’ – whatever that means has to do with the political economy of the sector. Consumers on their part blames President Buhari, the Minister of Power, and DISCOS – who have preferred to be ineffectual in areas they could be very effective. DISCOs have turned themselves into the power sector’s un-cautioned bullies, and NERC has equally failed to prevail them and other actors in the sector to conduct business appropriately. Several deadlines issued by NERC to DISCOS to install prepaid meters for customers (many of whom have paid for these meters) have not been met with February 28, being the latest deadline. Consumers now group themselves in different ways that seem right to them to find solutions.  How else do you know a market that is broken and failing if not by these swarming challenges?

As depressing as the tale of the power sector is especially with continued drop in gas supplies to power plants, the Minister of Power, Mr Fashola has confidence that a policy that leads to more gas plants would be what will fix the system in terms of generation challenges. Asides, challenges with vandalization and liquidity that have adversely affected supply of gas to power plants, there is a looming threat to further development of Nigeria’s gas resources that will guarantee adequate supply of gas to our power plants. Recently, Christopher Akor of Business Day called the nation’s attention to a surreptitious attempt by the National Assembly to amend the Nigeria Liquefied Natural Gas (NLNG) Act that will mandate the company to remit 3% of its annual budget to Niger Delta Development Commission (NDDC). This move is not in the interest of Nigeria’s national energy security. Government has many ways to increase NDDC’s funding base than to further tax NLNG.

It is not surprising to hear about these moves especially when Nigeria’s Energy Commission independently develops Nigeria’s Energy Master Plan, Ministry of Petroleum Resources (MoPR) and Ministry of Power (MoE) are independent ministries and have their different ideas of how the sectors should be ran and for what purpose.

To MoPR, Nigeria’s gas is for export to earn foreign exchange, to MoE, ‘gas would help solve the power problem, maybe we should talk with MoPR to see what can be done’. Then policy makers turn around to say more tax and contributions need to be extracted from the gas sector to fund activities that can be adequately met by other means. What government should be doing at this time is to make development of the gas sector as attractive as possible. For Nigeria’s vast gas reserves to contribute in any significant way that will help solve Nigeria’s power needs especially in the long term, the Department of Gas at MoPR must rise beyond “overseeing” NLNG, West African Gas Pipeline (WAGP) Project, Trans-Sahara Gas Pipeline Projects and other projects it may have entered into and work to ensure that Nigeria’s gas is harnessed for the country’s power needs. The Directorate of Gas and Power at the Nigeria National Petroleum Corporation (NNPC) must also do more than “monitor and support” all LNG and Independent Power Producers (IPP) Projects in Nigeria. Government has to find ways for ministries, departments, directorates, agencies, commissions that work in the energy and power space to work as close knit as possible.

While Nigerians wait for Nigeria’s gas to be turned to power, there has to be new and quick to deploy solutions and alternatives such as renewables – solar, wind, biomass, biofuel, waste, hydro which are solutions and alternatives for today and the future. Government has to recognize and believe that these are feasible and practical solutions and alternatives. The Minister of Power’s view that renewables are not a solution but an alternative is problematic and does not help government in planning and policy development. Renewables on their own are however not “the” solution even when combined with power from gas. Solving other problems around energy efficiency, social, financial, technological, political, organizational, institutional and market services issues are part of the solution for our very complex and complicated electricity market. It is true that the current high forex rate in Nigeria and other factors including high duties, taxes and fuel subsidies adversely affect an accelerated uptake of renewable energy solutions particularly solar. What I see as the most important and key factor that will help fix Nigeria’s electricity market is a successful business model for renewable energy consumer financing. This will disrupt the market in ways that were never thought possible and will force the Nigerian government and other actors in electricity market to get their act together. Renewable energy entrepreneurs must continue to work hard to get this done.

 

Okafor Akachukwu is the Energy and Environment Editor, The Initiative for Policy Research and Analysis (InPRA) and a Science Policy Research Unit (SPRU), University of Sussex trained Energy Policy, Innovation and Sustainability Expert. Email: akachukwu_okafor@yahoo.com