Power
Nigeria govt slammed for epileptic power
Nigeria’s former Chairman anit-graft boss (the Economic and Financial Crimes Commission) Mallam Nuhu Ribadu has slammed the epileptic nature of power supply in the country in spite of billions of naira spent over the past twelve years.
ABUJA – Nigeria’s former Chairman anit-graft boss (the Economic and Financial Crimes Commission) Mallam Nuhu Ribadu has slammed the epileptic nature of power supply in the country in spite of billions of naira spent over the past twelve years.
Speaking in an interview with journalists at the background of a special Visitors’ Forum, a lecture session organized by the Nigerian Electricity Regulatory Commission, NERC, in Abuja, he noted that Nigerians look up to the regulatory agency to create an efficient and competitive system that will make the industry thrive.
He remarked that it is shame that after so many years, Nigeria could not boast of reliable and effective electricity. “It is a failure and a shame that something as simple as electricity we cannot provide for Nigerians, in spite of billions of dollars earned from oil every year.”
“Poor electricity supply is behind most of the problems we are facing as a country – it has direct relationship with the poor state of the economy, rising cost of living and our inability to produce the things we need as a country,” Ribadu added.
According to him, most developed and developing countries have long solved the problem of electricity generation, even as he stressed that effective and reliable power industry is at the heart of every economic growth index.
He noted that the state of the nation’s power supply over the years has been “embarrassing, almost humiliating, considering that many countries in Africa with even less resources have done better. It is a shame to observe that Egypt, in spite of all their challenges in the past few years, still generates over 70,000MW of power, and South Africa generates more than 40,000MW of electricity, while Nigeria still struggles to produce a mere 4,000MW of power.”
Ribadu asserted that “if NERC gets it right with regards to the reform and regulation in the power sector, Nigeria will it right on electricity. Today, NERC is at the forefront of the march to reform the power sector, and a lot of Nigerians are looking up to them to deliver, and with the caliber of people I see here and the structures they have put in place, I have every confidence that we may finally on the path to true electricity sector reform.”
“I think that given the reform process and that programmes that we have today in the country, NERC is at the centre of it as a regulator. If they manage it very well, if they carry on with the reform programme and processes that are in place, chances are that we will succeed. And succeed we must because electricity is so critical to the economy and well-being of the nation.
Ribadu, who currently chairs the Special Petroleum Revenue Task Force of the Federal government, also stressed that failure of the regulatory agencies in the energy industry to perform their tasks is to blame for the fuel subsidy mess the country is currently embroiled in.
According to him, “The regulatory agencies in the sector are directly responsible, because it is government money. When such money goes out it has to go through somebody, who is a government employee that has responsibility to protect it and make sure that we get value for every dime spent. It must be with his own conspiracy that money goes out for products or services not provided.
“Therefore, one can easily come to the conclusion that it is a failure of the regulators and those with that responsibility, and we would like to see justice done for those who allowed the nation’s money to go out in that manner.”
The former anti-corruption czar pointed out that “if the PPPRA (Petroleum Products Pricing and Regulatory Agency) had done its job, the whole subsidy mess would not have happened. If I were to handle this subsidy thing, I will just go after the PPPRA, especially those who were at the helm when all these mess took place. In one week, I will bring out every single person who took one penny. I will not bother myself with anybody else, I will just get them (PPPRA) because nobody would make a penny out of the subsidy regime without the direct complicity of the PPPRA.”
He asserted that the report from his Task Force does not have anything to do with the fuel subsidy management but with the revenue profile of the energy industry, and ways the country could maximize revenue potentials from its vast hydro-carbon resources.
“The terms of reference of our task force are totally different from what is currently being discussed at the National Assembly and all over the country. But it also has a direct correlation with the responsibilities of the regulatory agencies, particularly the downstream sector. We do intend to come up with our position and I won’t like to comment on the fuel subsidy issue, which is the work of another committee,” he noted.
Ribadu further expressed confidence in anti-graft agency he once headed to get to the root of the fuel subsidy mess, adding that, “I know that the EFCC is working very hard on the matter, and I believe they will not disappoint millions of Nigerians who are expecting a just and reasonable conclusion on the matter. They are working on it, and sometimes this kind of work does take time so that it would be able to stand the test of prosecution.
“They need to assemble evidence so that they can have a successful prosecution, because it is an issue of law enforcement and recovery. My take is that we still believe that we can get justice; it is a matter of time and, ultimately, I have belief that Nigerians will see justice done in the matter.”
He further defended the work of the EFCC, adding that the current crop of leadership at the Commission is competent and professional. “They must be given space and time to do their work effectively. There should not be any outside interference. In the present crop of leadership in the EFCC, we have quality people, some of the best that we can get in our country today, in my personal view.”
According to reports, Nigeria’s population may face more challenging times ahead as electricity tariffs are projected to increase by over 40 percent in the near future.
This rise in tariffs could ultimately result in the elimination of all energy subsidies in the country.
Currently, the electricity sector relies on a monthly subsidy of approximately N50 billion, stemming from a shortfall in revenue.
The tariff hike, scheduled to take effect from July 1, will pose another significant test for President Bola Ahmed Tinubu’s administration and its ongoing market reforms.
The government has already taken steps to remove subsidies on Premium Motor Spirit (PMS) and implemented a floating exchange rate for the national currency.
These decisions have added complexity to the price-setting process of the Nigerian Electricity Regulatory Commission (NERC) and its 2022 Multi-Year Tariff Order (MYTO).
Despite power sector players failing to meet the target of supplying a minimum of 5,000 megawatts, even after signing contracts with the Nigerian Electricity Regulatory Commission (NERC), the current Service Based Tariff (SBT) is based on an exchange rate of N441/$ and an inflation rate of 16.97 percent.
According to NERC’s directives in 2015, the average tariff for distribution companies (DisCos) and different categories of end-users was N25 per kilowatt, as per Order 198/2020, which came into effect on September 1, 2020.
However, in the MYTO for 2022, the average tariff increased to N60 per kilowatt across all customer categories, and in the most recent update, it stands at N64 per kilowatt.
The determination of the 2015 tariff relied on a foreign exchange rate of N198.97/$, which increased to N383.80/$ in 2020 and further to N441.78/$ in 2022. In terms of inflation, the 2015 MYTO utilized an 8.3 percent rate, which rose to 12 percent in 2020 and reached 16.97 percent in 2022.
Currently, the inflation rate stands at 22.41 percent, and experts predict it could reach 30 percent by the end of June, considering the floating of the naira and the removal of subsidies on Premium Motor Spirit (PMS).
The tariff determination process takes into account various factors, including the significant metering gap of over seven million, gas prices, losses within the system, and the actual generation capacity. These elements play a role in determining the final tariff.
As anticipated, NERC had projected that the tariff for July 2023 would eliminate subsidies and introduce increases to the previously frozen tariff bands D and E.
These adjustments were intended to raise the bands from N54.59/kilowatt to N62.16 for band D and from N48.37/kilowatt to N61.16 on average. Moreover, the average increase across all bands was expected to reach N67/kilowatt.
However, due to the ongoing floating of the naira and the significant inflationary pressures, it is now projected that the new average tariff will need to be approximately N88/kilowatt for the power sector to recover its costs.
According to energy lawyer Madaki Ameh, the continuous and frequent increases in power tariffs are akin to a form of blackmail against electricity consumers.
Amen said “Indexing the cost of electricity on the dollar is a huge mistake because most of the inputs for electricity supply are local. The DisCos are also holding Nigerians to ransom by failing to increase the supply base, thereby spreading the tariffs across a broader spectrum of consumers to reduce the unit cost of electricity.”
He insisted that as long as there remain many unmetered consumers and many others not connected to the grid at all, the few consumers on the grid would continue to be subjected to unjust tariffs, which are not reflective of the quality of service delivered.
Ameh hoped that the signing into law of the new Electricity Act would mark “the beginning of light at the end of the long tunnel of inefficient and epileptic power supply in Nigeria.”
Segun Ajibola, the former President of the Chartered Institute of Bankers of Nigeria (CIBN) and a professor of Economics at Babcock University, highlighted that there remains a gap between the cost of electricity and the value it provides in exchange.
“Nigerians are still struggling to keep pace with the cost of energy for business and household use. If the electricity tariff goes up as envisaged, the question remains if there will be value for the quantum of electricity so paid for.
“The truth remains that if electricity supply is constant, of the right quantity and quality, the envisaged upward review in the tariff will be gladly absorbed by the populace,” he said.
Lanre Elatuyi, an Electricity Market Analyst, expressed that the recently implemented tariff rate would have significant implications. He emphasized that the devaluation of the Nigerian currency poses a major challenge for companies with dollar-denominated loans to repay.
He said “They will need more naira today to buy a dollar. They need to manage their exposure to foreign exchange risk. Even operators of hydro plants pay their concession fees in dollars. So, wholesale electricity price will be adjusted upward and this will get to the end users’ tariffs too.”
Senator Shehu Sani, a prominent Nigerian lawmaker has accused President Muhammadu Buhari’s government and state governors of secretly selling five power generating plants without disclosing the utilization of the funds received.
He disclosed this in his Twitter handle on Monday.
Senator Sani, known for his outspoken nature and activism expresses his concerns over the alleged undisclosed sale of the power plants.
He claimed that the government, in collaboration with state governors, had carried out the transactions without informing the Nigerian public about the purpose of the funds acquired from the sale.
The post reads “Buhari’s Government in collaboration with the State Governors quietly sold the five power generating plants without telling the country what the money was used for.
The Vice President of Nigeria, Prof. Yemi Osinbajo, has inaugurated the Afam 3 Fast Power 240-megawatt turbine project in Rivers State.
The project, which is a subsidiary of the Transcorp Group located in Oyigbo, on the outskirts of Port Harcourt in the state, was unveiled during a ceremony that took place on Tuesday.
The event, which was attended by several dignitaries, including the Chairman of Transcorp Group, Tony Elumelu, and other top officials, saw the Vice President arriving at the venue in a chopper at exactly 11:35 am.
Upon his arrival, he was escorted into the premises where he officially inaugurated the project.
During his speech at the event, he disclosed that the acquisition of the project was approved by the National Council on Privatisation (NCP) and the acquisition cost was ₦105.3 trillion.
Osinbajo further emphasized that the successful completion of the project is a significant breakthrough in Nigeria’s power sector.
In his address, Osinbajo said, “In 2020, electricity subsidies reached N584 billion, but service-based tariffs have led to a doubling of collection in the Nigeria Electricity Supply Industry from N40 billion in 2020 to N80 billion in the first quarter of 2023.
“If this trajectory continues, the Nigeria Electricity Supply Industry will be able to pay for itself. Our administration has also created programs for off-grid for electrification. Rural Electrification Agency now has the capacity to provide electricity supply on a first-class basis.
“We are on track to electrify all Nigerians in the next decade. However, we will not make progress if our gas supply does not improve. The gas supply challenges are hampering improvements.”
He further lauded General Electric, the National Council on Privatization (NCP), and the host communities for their contribution to the completion of the Afam 3 Fast Power 240-megawatt turbine project in Rivers State.
Osinbajo highlighted that the successful completion of the project will significantly increase the country’s power supply capacity, leading to a better quality of life for Nigerians.
In November 2020, the federal government and the Transcorp Power Consortium signed a share sale and purchase agreement in relation to Afam Power Plc and Afam 3 Fast Power Limited.
The National Council on Privatization approved the privatization of the Afam Power Plant back in August 2017, which triggered a competitive bidding process involving 12 prospective investors.
After careful consideration, Transcorp Power Consortium emerged as the preferred bidder with a combined offer of N105 billion.
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