ThistlePraxis Consulting-Sustainable Conversations 6 Report
THISTLEPRAXIS CONSULTING
SUSTAINABLE CONVERSATIONS 6
POWER SECTOR REFORMS: SUSTAINING CHANGE FOR DEVELOPMENT
1.0 BACKGROUND OF THE DISCOURSE
The Nigerian economy is one of the leading oil exporting economies in the world, with the largest Gross Domestic Product (GDP) in Africa of about US$510 billion, and the 26th largest in the world. However, Nigeria is also known to be a nation with the widest gap between the demand for and supply of energy globally. Power is key to the development of any economy, and as such must be provided at full capacity to drive such development. Thus, it is imperative that Nigeria achieves a sufficient level of energy generation and distribution if it is to meet its goal of becoming the world’s 20th largest economy by the year 2020 (Vision 20:2020).
1.1 HISTORICAL OVERVIEW OF THE NIGERIAN POWER SECTOR
Electric power generation in Nigeria began as far back as 1896 during the colonial era, and in 1929 the Nigeria Electric Supply Company (NESCO) was established. From 1951 to 1962, several reforms were executed in the Nigerian power industry creating two (2) subsequent power regulatory bodies that were eventually merged to form the then National Electric Power Authority (NEPA) in 1972. Today after several other reforms, NEPA has transformed overtime from becoming the Power Holding Company of Nigeria (PHCN), to now having seventeen (17) successor companies established after the power privatization process.
In April 1982 the Nigerian government invited a World Bank team to visit the nation in order to assess the problems facing its energy sector; identify the various policy options for gas utilization in the economy; identify investment opportunities; and provide a framework for technical assistance in the power industry. After several visits from the World Bank team, a full scale energy assessment and utilization study was done and the team produced a report that captured issues plaguing the Nigerian power sector and possible solutions to such issues.
1.2 ENERGY DEMAND VS SUPPLY IN NIGERIA
Oil being the most significant resource in the Nigerian economy, provides major funds for the nation’s public expenditure. However, oil deposits are presently limited and production outputs are expected to start declining in the next 15 to 20 years. Rapidly growing local demands for petroleum products may reduce the economy’s exportable surplus if alternative sources of energy are not used as substitutes in the near future.
Most households and businesses in the economy have to generate their own forms of energy, thus immensely adding to their daily costs of operation. In a world where adequate and reliable energy supply has become the main factor for enhancing economic development and productivity, Nigeria’s power supply still remains grossly inadequate. The present power demand level at 30 terawatt hours in the year 2010 is estimated to increase to 72 terawatt hours in 2020, and eventually to 166 terawatt hours in the year 2030.
1.3 PRIVATIZATION OF THE POWER SECTOR AND WHAT LIES AHEAD
To address the poor power supply situation in the country, the federal government in 2004 initiated the National Integrated Power Project (NIPP). The project aimed at boosting Nigeria’s generating capacity, and reducing gas flaring from oil exploration in the Niger Delta region. However, the power plants under the NIPP still have issues of limited gas supply which greatly affects transmission lines and this is why the 12,800 megawatt short-term power goal has not yet been achieved. The major objective of the power privatization process was to boost the generating capacity of the Nigerian power industry. The federal government with a further vision to enhance power supply decided to also privatize the nation’s transmission assets.
At present, the Nigerian power industry has the Nigerian Electricity Regulatory Commission (NERC) as its chief regulator. NERC was formed through the EPSR Act of 2005 and was inaugurated on 30 October 2007, with the responsibility of protecting the interests of Nigerian power consumers; issuing licenses to operators/investors; setting and reviewing electricity tariffs; and where possible promoting competition. The Commission's main objective is to protect existing and future consumers' interests in relation to electricity generated and conveyed by distribution or transmission systems.
According to experts in the power sector, Nigeria aims at achieving a generation capacity of 40,000 megawatts by the year 2020 and this (as earlier stated) will require the use of other forms of energy; other than hydro sources and gas. Healthy competition must also be promoted in order to facilitate the sustainable growth of a functional energy sector in Nigeria. Synergy between all energy stakeholders also needs to be happen, and community engagement in form of publicizing power sector data is required to make the power sector more efficient.
2.0 INTRODUCTION (OPENING REMARKS)
ThistlePraxis Consulting, in conjunction with Etisalat Nigeria, hosted the 6th edition of the Sustainable Conversations programme on the 15th of November 2014, at Four Points by Sheraton Resorts, Lekki. The theme of the event was “Power Sector Reforms: Sustaining Change for Development” and it was a platform for key stakeholders of the Nigerian power sector to discuss the way forward in the process of improving on the quality of energy services in the Nigerian economy.
The event kicked off with welcoming remarks from the Senior Consultant, ThistlePraxis. The floor was then left open to the Chief Executive Officer (CEO) of ThistlePraxis to give a brief background story on the historical trends in the Nigerian power sector since independence.
The Director for Brands and Communications, Etisalat Nigeria, also gave further opening remarks in a paper titled “Sustainability: Building Block to National Development”, which focused on Corporate Social Responsibility (CSR) as a best practise in business globally. Sustainable Development was defined (according to a United Nations World Commission on Environment and Development [WCED] report entitled “Our Common Future”) as “meeting the current needs of current generations without compromising the ability of future generations to meet their own needs”. Etisalat has CSR as one of its core values while doing business in the Nigerian economy; as it is a major means through which the company can contribute to the nation’s sustainable development. CSR projects being pursued and executed by the telecoms company in Nigeria focus on the areas of health, the environment, and most especially education. They include;
The Etisalat Adopt-A-School Initiative running in Lagos state.
The Etisalat Career Counselling and Monitoring Scheme.
The Etisalat M.Sc. Telecommunications Engineering Programme instituted in Ahmadu Bello University (ABU), Zaria.
The Etisalat Academic Merit Award Programme.
Etisalat is also responsible for setting up the local chapter of the World Business Council for Sustainable Development (WBCSD) in Nigeria, towards promoting its CSR activities in the economy, as the principles of sustainability are fast becoming more important in a world where the goals and objectives of individuals, firms, and government are closely interwoven.
3.0 PROBLEMS, RECOMMENDATIONS AND POSSIBLE SOLUTIONS
During the event all participants were allowed to contribute to the progressive trend of discussions on the problems facing the Nigerian power sector and possible solutions to such problems. Discussions took place from the panel side and also from the audience side.
3.1 PANEL SESSIONS (RESOURCE PERSONS’ OBSERVATIONS AND RECOMMENDATIONS)
The panel sessions, which involved key power industry experts, began with a focus on how Nigeria arrived at its present state of unstable electricity supply over the years. The following observations were made;
Policy has been a basic contributing factor to the problem, as the Nigerian power sector has lacked a proper framework to create a functional energy generating and distributing system in the economy over the years. Nigeria does not lack power, but it has expensive power based on the fact that private individuals and companies constantly have to generate their own energy from time to time.
The level of dependence on federal government policies, to solve epileptic power supply in the country, has also compounded the nation’s power problems. Such over reliance needs to be reduced, and other stakeholders must start developing possible solutions to the issue. State administrations such as the Lagos State Government have begun to develop initiatives that will boost power generation and distribution within their territories. Lagos now supplies constant power to over 20 of its state owned institutions within the Lagos Island axis; and the Island has a 57 kilometre underground distribution network that is quite efficient which Distribution Companies (DISCOs) can pay to tap into towards reducing the 40% of Lagosians that do not have access to power. Privatization will also help to fill in the gaps in the power sector, as the government alone does not possess all the necessary resources to drive sustainable growth of the industry; it costs approximately US$1 million to generate 1 megawatt of electricity. Private firms are willing to provide the best quality of services from the power sector if only their Returns on Investment (ROI) are guaranteed and maximized.
Inadequate infrastructure has also contributed to the unstable power situation in the country. In the 1970s and even before, the then infrastructure on ground was enough to serve the then population of the country. After the 1970s, the government did not invest enough in infrastructural expansion; thus, creating a situation in which the Nigerian population increased at a much faster rate than the nation’s infrastructure. Now the infrastructure on ground is not enough to serve the present population efficiently and effectively. Only a maximum of 4,600 megawatts has been generated so far for a population of more than 160 million people in Nigeria and above 80% of Nigerian firms are running on their own privately generated energy to drive their daily business operations.
The next discussion focused on the area of procurement and how much of an issue it really is in the Nigerian power sector. The following observations were made;
Procurement is quite important because it is a stage in which individuals who will manage power projects can be identified and chosen. More accountability can be achieved at the procurement stage; and verification can occur while all stakeholders responsible for power generation, distribution and transmission are questioned.
Key challenges facing other stakeholders in the power services industry were also discussed. The observations made are as follows;
Policy constraints are one the issues being faced, as organizations such as the Lagos State Electricity Board (LSEB) are constantly approached by private firms to supply them with constant energy, but the law does not provide for such terms.
Gas constraints also contribute to the problems facing such organizations in the power sector.
The reorientation process for the workforce inherited by the new Generation Companies (GENCOs) and DISCOs was addressed. The observations made are as follows;
The reorientation process is a function of leadership. There are mechanisms that can be used to check against corruption both in the private and public sector today; and the mechanisms should be properly utilized to prevent any of such absorbed workers from acting fraudulent while on the job.
The professional capacities of the inherited workers must be developed based on their skills, in order to increase their productivity on the job.
The significance level of community engagement in the power sector was also focused on. The observations made are as follows;
The economy is made up of households, firms and government. Therefore, it is necessary that communities are also included in the policy formulation and implementation process for the power industry. The power sector regulators and key players must share information with the larger community concerning development in the sector. Rules and regulations governing the sector need to be made clear to the public.
NERC must enforce key players in the power sector to publicize certain information on public expenditure to watchdog organizations that require such data. This will encourage some form of inclusive governance in the sector.
3.2 OPEN FLOOR SESSION & CONCLUSION (RECOMMENDATIONS FROM THE AUDIENCE)
This concluding session involved members of the audience giving their personal views and recommendations of possible solutions to the power problem in Nigeria. The recommended solutions are as follows;
Power generated via gas should be used for industrial purposes, while alternative and renewable sources of energy should be used to generate power for household purposes which would be on a smaller scale.
The government and other able stakeholders of the power sector need to invest in academic research in order to promote the development of Nigeria’s own indigenous form/s of energy.
Effective communication and implementation of the power development framework needs to occur in order to ensure that the Nigerian power sector can grow as quickly as possible.
The public must also be responsible and accountable for all infrastructure already on ground in order to reduce vandalism of power assets. Citizens may also visit the websites of the various key stakeholders of the power sector, as their online platforms are very functional and have email addresses for receiving any public complaints.
Interest groups (one of which was set up during the forum, by the CEO of ThistlePraxis Consulting) need to ensure that members of the public are enlightened about all developments in the Nigerian power sector. Regulatory bodies also need to engage the public more in their activities.
Private sector investors such as the International Oil Companies (IOCs) need to take risks by investing in energy generation via gas towards feeding the NIPP with more energy than the 5,800 megawatts it already possesses; as this will ensure that the 12,800 megawatts envisioned for next the 24 months can be achieved.