Turning the table on discos

Lekan Sote

It looks like the Federal Government finally found the spunk and
resolve to call the bluff of the 11 electricity distribution
companies that have been declared technically insolvent.

The Secretary to the Government of the Federation, Boss
Mustapha, identified the liquidity challenge facing the electricity
sector, when announcing the resolve of President Muhammadu Buhari
and the new ministers to address the problems facing the
country.

In 2017, President Buhari sent former Minister of State for
Budget and National Planning, Zainab Ahmed, to tell a plenary of
the National Economic Summit Group that: “The power sector…
privatisation has not worked well, in the sense that what
government sought to achieve, by way of development of the power
sector, has not happened yet.”

Most of those who won the bids to purchase the successor
companies of the Power Holding Company of Nigeria had no technical
and financial competence. Most were oligarchs connected to the
powers that be under the former military Head of State, Gen
Abdulsalami Abubakar, administration.

Vice President Yemi Osinbajo has hinted that those
underwhelmingly underperforming companies that are unable to
deliver the electricity supply for domestic and industrial needs of
Nigerians may have to yield the ground for new investors in
generation, transmission, and distribution infrastructure.

Understandably, the Executive Director of the Association of
Nigerian Electricity Distributors, Sunday Oduntan, declined to
comment on the issue, while Dr. Joy Ogaji, Executive Secretary of
the Association of Power Generating Companies, neither responded to
calls nor text messages sent to her.

The Vice President revealed that “(Nigeria has) 13,427 megawatts
of installed (electricity generating) capacity, an available
capacity of 8,342 megawatts,” and that the national grid has the
capacity to transmit about 7,000 megawatts, which he pointedly
suggests is “an increase from less than 5,000 (inherited by the
President Buhari’s government) in 2015.”

He also made sure to push the blame to the DISCOs, whose
“distribution capacities… are significantly low, hovering around
4,000 megawatts on average, with a peak of 5,400 megawatts.” As of
Thursday last week, the 11 GENCOs, out of which eight were down,
generated a total of 2,970 megawatts!

Former President Goodluck Jonathan, who initiated the sale of
the successor companies of the Power Holding Company of Nigeria in
2013, had hoped that would reduce their operating costs by 40 per
cent, add about three per cent to the nation’s Gross Domestic
Product, and significantly reduce unemployment.

A frustrated Managing Director of the Transmission Company of
Nigeria recently asked the Federal Government to liquidate some
unnamed DISCOs: Usman Mohammed is angry with some DISCOs that
aren’t playing according to industry rules.

He had said, somewhat angrily, at a particular industry
defaulter, “When (a DISCO) writes a letter, for example, to a
market operator, to say, ‘I will not be able to pay within the
market,’ that means you should be liquidated!”

And Dr. John Momoh, Chairman of the Nigerian Electricity
Regulatory Commission, promised consumers that DISCOs would be
paying penalties for low quality services. “If your meter doesn’t
read, then you won’t be paying. If you have no meter, there is
going to be a capping on how much you should pay.”

Prof Victor Ayedun-Aluma of the Mass Communication Department of
University of Jos, recently posted a wisecrack on behalf of his
(probably) one-member Academy of Real Mathematics, on his Facebook
page.

Ayedun-Aluma submitted that, “Modern Nigeria (would have)
happened if, and only if, 95 per cent of Nigerians, and or
(Nigeria’s) residents, had access to electricity (supply) for 24
hours every day of the week,” among other things.

The dire situation of the electricity supply has compelled the
Ekiti State Government, that desires rapid development of its
state, to sign a pact with the fumbling Benin Electricity
Distribution Company.

Ekiti State Commissioner for Infrastructure, Bamidele Faparusi,
who argues that power supply is key to economic growth, says,“The
growth of Small and Medium Scale Enterprises is determined by the
quality of electricity supply.”

But the electricity supply situation in Nigeria will soon face
financial difficulties, even though President Buhari recently
approved the release of N600bn intervention fund, the third so far,
after the generation and distribution arms of the sector were
farmed out to the private sector.

The Senate kicked against this, because of the dire financial
situation of the country, which returnee-Minister of Finance,
Zainab Ahmed, recently described in the following words: “Our
nation is facing a near fiscal crisis… We have to increase revenue…
We still have to pay salaries… pay debts…. operate on a day-to-day
basis, and we have to do capital projects for the sustained growth
of our economy.”

In other words, there are not enough funds for Nigeria’s
electricity infrastructure needs as the Central Bank of Nigeria
expects DISCOs to pay the N34.05bn loan it gave them to address
shortfalls in electricity sector revenues.

This is notwithstanding that the National Economic Council made
the Nasarawa State Governor, Abdullahi Sule, to announce an upward
surge in non-oil sector from $1.17bn in 2016, to $3.16 billion in
2018.”

One would have been more comfortable if the finance minister, or
the National Bureau of Statistics, and not the freshman governor,
had made the announcement. Being off his ballpark, Sule may not
know why data may not agree with reality.

While NERC denies intent to increase electricity tariff, its
General Manager for Public Affairs, Usman Arabi, says, “However,
the commission, in the discharge of its statutory responsibilities,
(as) enshrined in the Electric Power Sector Reform Act, shall
continue to undertake periodic reviews of electric tariffs in
accordance with prevailing tariff technology.”

First, NERC’s doublespeak says that from the first day of 2020,
there is going to be an increase, ranging from N8 to N14 per
kilowatt hour for electricity consumption, depending on the
market.

Then, it adds that this was merely a plan to recognise the
historical tariff deficit (between 2015 and 2018), and necessary
adjustments so that the DISCOs that lost about N1.15tn tariff,
could recoup. That may not have been the exact words.

There is a contradiction in these policy initiatives and
communications: Government recognises that the GENCOs and DISCOs
are not working up to par, and wishes to invite new investors to
buy them.

But it appears that government, that admits that it doesn’t have
the money, is thinking of repossessing the GENCOs and DISCOs, and
buff them up before offloading them to private investors a second
time.

The intention to spend more money on the electricity sector is
in the Letter of Agreement on the Nigerian Electrification Road map
that the Federal Government recently signed with Siemens for a
three-phased project to achieve 25,000 megawatts by 2025.

But the announcement by the Managing Director, Usman Mohamed,
that the TCN is “going to have a 330KVA that will run from Shiroro
to Togo… Ghana (and) Cote d’Ivoire,” to extend power supply, that
is not adequate for Nigerians, to West Africa, doesn’t quite add
up.

Anyway, the corporate failure of the GENCOs and DISCOs is
hurting the Nigerian economy. And the earlier the table was turned
against those who invested in an area where they lacked competence,
the better for everyone.

But whoever buys those lemons should buy as is, where is basis;
Government shouldn’t put more money into the drainpipe. Finance
Minister Ahmed says Nigeria has a finance problem.

– Twitter @lekansote

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