Despite the country’s incredibly low output in electricity generation, the Power Distribution Companies periodically reject power load allocated to them because of their incapacity to deliver, which worsens the misery of consumers nationwide. This is a serious economic challenge. The Federal Government, which holds 40 per cent equity in the firms, is responding with its release of N72 billion for the upgrade of the distribution networks in order to reverse the trend of excess power wastage.
But the bigger issues are the ongoing expansion of the national grid for it to take up to 20,000 megawatts of electricity by 2021 and the corollary of why the DisCos need to keep pace with the project. To achieve this, the Managing Director, Transmission Company of Nigeria, Usman Mohammed, says the DisCos need to make at least $4 billion investment in the upgrade of their distribution networks over the next three years, going by its painstaking evaluation.
It is a tall order for the DisCos. Through political patronage and cronyism, under the Goodluck Jonathan administration’s warped privatisation programme, the firms were sold to them in 2013, though they lacked the technical expertise and financial capacity to run them. Although official tally presently puts the country’s power generation at 7,000 megawatts, yet consumption vacillates between 3,000 and 5,000MW monthly, thus wasting 2,000MW or more. This is ridiculous for a country of 190 million people and Africa’s biggest economy in terms of Gross Domestic Product.
The DisCos’ performance since 2013 has confirmed them as a tragedy for the economy. Just last week, the Nigeria Electricity Regulatory Commission said it received 109,048 complaints against the DisCos in the third quarter (three months) in 2017. Across the country, their corrupt estimated billing system and failure to provide pre-paid meters perennially generate animus between them and consumers. Besides, they are being clobbered by huge indebtedness to service providers, which was N183.19bn as of April 2018. A report released by CSL Stockbrokers Limited, a Lagos-based firm, on banks and their exposure to the power sector showed that electricity industry exposure of eight banks stood at N402 billion ($1.3 billion) in their 2015 financial results.
Apparently, improvement in service delivery without a huge capital inflow into the system is a false hope for anyone to expect from this set of players. In April 2017, the Executive Director, Association of Nigeria Electricity Distribution Companies, Sunday Oduntan, put the power sector’s funding shortfall at N800 billion. Ironically, he blamed the Federal Government for the gap.
Having realized its faux pas in selling the electricity firms to unworthy operators, what is required of government to do now is to review their contracts to pave the way for well-tested international operators with the capital to step in as dominant shareholders. This is the only way the TCN national grid expansion will make sense; otherwise, it will be a huge economic waste. The Minister of Power, Works and Housing, Babatunde Fashola, should seize the moment to trigger the process for a new ownership structure, having belatedly realised that darker days are ahead with these errant operators in charge. Chinedu Nebo, one of Fashola’s predecessors, had in 2014 threatened to invoke the non-performance clause in their contracts to send them packing for non-performance. Nigeria has since reached that bridge and should cross it now!
The government has tried to patch up this mess through the Central Bank of Nigeria’s periodic grants to the DisCos. But the conflation of our corrupt business environment and insincerity of the operators enfeebles such interventions. The CBN funded the procurement of 704,928 pre-paid meters for the DisCos; paid N120.2 billion directly to the DisCos and GenCos as part of the fourth tranche of disbursement, under the N213 billion Nigeria Electricity Market Stabilisation Facility; and installed 500 transformers to enhance distribution networks. However, the reality is that the demands of the sector simply transcend these palliatives.
The DisCos have made insignificant investments since they took over. This was not the original design of the power privatisation. Quite early, the Ikeja Electricity Distribution Company had daringly said, “As investors, we need to look at where we are going and also consider whether the metering scheme will get us to where we are going. However, if it will not get us to where we are going; we will drop it.” This brazen illegality and fleecing the public on the watch of government cannot continue endlessly.
Running the economy on standby generators cannot give it the shot in the arm that it badly needs for the real sector to unleash its productivity, create jobs for the teeming unemployed and wealth in the poverty-ridden country. When Nigeria’s 7,000MW post-privatisation power generation, five years after, is juxtaposed with that of Argentina, which in 1992 galloped from 13,000MW to about 23,000MW in 2002; and the efficiency, investment and competition the same process triggered, those who masterminded our own sorry saga should be seen as nothing but rank economic saboteurs. It is time to redress the grisly fraud.