Fashola, DISCOs’ Feud Point To Failed Privatisation Progamme

Fashola, DISCOs’ Feud Point To Failed Privatisation Progamme


In the past three weeks, the Minister of Power, Works and Housing, Babatunde Fashola, and the 11 companies that took over the distribution of electricity in November 2013 under the privation of the energy sector have been engaged in dramatic exchanges while electricity consumers continue to groan under increasing epileptic power supply

It has all but confirmed that there is no discernible strategy to end the harrowing experience of electricity consumers. It culminated in the DISCOs jointly imploring the federal government to buy back their businesses even at a discount as they found no silver lining in the intractable crisis in the energy sector.

It was a rather shocking development for a programme that was touted as the solution to power crisis when it was introduced. The electricity distribution companies (DISCOs) were expected to spearhead investment into electricity distribution to stabilise power supply. In a press conference in Abuja two weeks ago, the Association of Nigerian Electricity Distributors, the umbrella organisation for the 11 DISCOs, expressed frustration on the state of distribution network and what they say is difficult operational environment.

The climax of the drama that characterised their statement was their undisguised dismissiveness of the privatisation programme. The Chief Operating Officer, Ibadan Electricity Distribution Company, John Ayodele, said of their readiness to divest from the business: “On when we are going to quit the business, the fact is that if you ask all the investors, because I’ve sat with them, if you can refund them their money in five minutes, they will quit in 10 minutes. No investor wants to stay.” It was too caustic a dismissal for a project which had taken a lot of financial and emotional investments from the government and the people, leaving no hope of a turn around in the medium term.

After doing the same thing over so many years and achieving the same result, it is clear the present system of national grid where all generated power are pooled together to be shared to all parts of the country under unclear formula has outlived its usefulness, assuming it was ever useful.

By official accounts, more than N3 trillion has been spent by the federal government in the past 15 years, a period during which power generation capacity recorded a marginal increase from 4,000 mega watts to just about 7,000mw attained recently. The amount is not in the value of the naira when it lost its lustre with the massive devaluation on the outset of the Buhari administration. It was a stupendous amount of money in dollar terms that added barely 2,000 mega watts of electricity over the period. 

Within the period also, the federal government had toyed with several options to boost power generation and distribution, including the Niger Delta Power Holding Company that targeted building of gas-powered plants and the eventual privatisation of the power sector. It was to drive the National Integrated Power Project (NIPP) that has become the subject of controversy over the amount wasted on it. In the previous administration, the nation was regaled with tales and investigations into how much was spent on it. From the initial budget of $16 billion, it later came to light that more than $4.4 billion drawn from the Federation Account was spent on the NIPP.

Aside from the yearly budgetary allocations to the power sector, the federal government has been regularly intervening either directly or through its agencies to provide financial support in the value chain in the sector. The approval of N701 billion for the Nigerian Bulk Electricity Trading Plc (NBET) to pay generation companies (Gencos) for services rendered as well as the N213 billion intervention by the Central Bank of Nigeria (CBN) to pay-off gas supply legacy debt readily come to mind. In the midst of the interventions, the DISCOs have continuously complained of revenue shortfall in the market which, by their reckoning, has hit the N809.8 billion mark.

The tale of the management of the national grid is one of waste, corruption and national stagnation. The cost on the country, especially the manufacturing sector whose products are no longer competitive in the international market, the lives lost to dangerous use of generators to power homes, the rise and dominance of generator importation as an industry, the health hazard and impact on the environment as well as huge cost to the economy make the retention of the national grid system an unmitigated economic waste.

Nigeria’s population is too large, the land mass too vast and the technical challenges of a grid too immense for the national grid system to be turned into a holy grail. The system has become a cesspool for corruption in a bloated administrative structure. The more money that is sunk into it, the worse the state of power supply becomes. It is time for the national grid to be unbundled into smaller, manageable but more efficient grids. Operating a grid should no longer be on the exclusive list as is presently the case. Former Lagos State governor, Bola Ahmed Tinubu, was the first to dare to seek alternative source of improving power supply through his Enron project. Federal interests frustrated the project.

Several states have gone into independent power projects but were forced to plough the electricity into the nebulous national grid where they got muddled up in the convoluted system. By frustrating such ventures and making the national grid the only route for power distribution, it is like arrested development is being foisted on the country as an official policy. Without reliable public power supply, all development and industrialisation plans will be still born.

We recommend that a national workshop should be convened forthwith to lay the ground work for the unbundling of the national grid, creation of regional grids, removal of grid management from the exclusive hold of the federal government and the licensing of states or group of states to own and operate their independent grids.