A short-term agenda for the power sector

Many Nigerians expect to see the Muhammadu Buhari administration make visible impact in the power sector within its first 100 days in office. However, those knowledgeable about the true state of affairs in the Nigerian power sector say this may not possible. Rather, they say, Nigerians should be looking at the first 200 to 300 days of the new administration to properly assess the government’s policy, impact and direction in the power sector. According to some industry experts, the government should use the first 200 days to lay the foundation that would allow for significant improvements in power generation, transmission and supply within the first 1,000 days and, hopefully, lead to 24-hour electricity supply within a reasonable and realistic timeframe in future.

While Nigerians and intending investors await the government’s policy direction in this critical sector, one thing the government must note is that the quality of appointees in the power sector matters. Essentially, who heads the Ministry of Power? Who should head parastatals under the ministry – Nigeria Electricity Regulatory Commission (NERC), Nigeria Bulk Electricity Trader (NBET), Transmission Company of Nigeria (in the event the management agreement with Manitoba Hydro is terminated), and the Market Operator? The quality of appointees to head the Power Ministry and its parastatals would be a major assessment of the ability of the new government to deliver on its plans and campaign promises for the power sector.

While it is neither a parastatal under the Ministry of Power nor a regulator in the power sector, the Bureau of Public Enterprises (BPE), unknown to many Nigerians, is the largest shareholder in both the distribution and generation companies, holding 40 percent ownership of the shares of all 11 Discos and at least 40 percent shares in the six Gencos on behalf of the federal and state governments as well as Labour. This is why BPE’s leadership cannot be toyed with as the bureau is critical to the successful delivery of the power sector reforms.

Once constituted, the first task of the new leadership in the power sector will be to develop and implement a three-five-year framework that clearly articulates strategies to be implemented that would lead to the stability, improvement and sustainability of the power sector. Such framework document must build upon previous documents such as the EPSRA and Gas Master-Plan as opposed to a “re-inventing the wheel” approach. It must also proffer solutions and strategies that would address the revenue shortfalls and stimulate investments in the power sector as well as extract firm, measurable commitments from all market participants, including gas suppliers, on achieving improvements across the value chain.

Within the first 200 days, the new government should ensure conclusion of the privatisation of the 10 NIPP gas-fired power generation plants. Indeed, privatising the NIPP power assets is what is now required to unlock over 5,000 MW of additional generation capacity and rapidly ramp up generation capacities far in excess of the 10,000 MW projected by the new government in the short term.

Credible, sustainable and cost-reflective tariffs are critical to the survival of the Nigerian electricity market. The EPSRA enshrines the requirement for investors to recover costs through electricity tariffs as well as an agreed rate of return on their investment. While ensuring that electricity tariffs charged can cover costs across the power sector value chain, NERC has both a moral and legal responsibility to make certain that electricity tariffs paid by consumers are both credible and sustainable and that only prudent and efficient costs are recovered by investors.

Importantly, the new government should resolve the Geometric/Aba IPP conundrum. As a matter of urgency, the Buhari administration must ensure that within its first 200 days in office, the Azura IPP project is provided with the necessary credit support to enable it reach the long-awaited financial close as quickly as possible.