Unlocking Power and Solid Minerals Sectors

Unlocking Power and Solid Minerals Sectors

Last week, writing about the explosive growth in Nigerians telecommunications, I lamented the self-imposed economic retardation which our policy makers have imposed on Nigerians, unfortunately often with our quiet connivance or sometimes even uninformed support. One very good illustration is the way we have denied the Nigerian economy of power, and acted as if generating power is a special and mysterious activity that requires a peculiarly Nigerian solution.

In 2001, sector specialists at the Bureau of Public Enterprsies (BPE) apparently wrote two documents-a telecommunications and a power policy. That same year, the Obasanjo government commenced implementation of the telecommunications policy. Even before the policy became law, the BPE and the Presidency had commenced those activities which could be handled administratively, including strengthening the National Communications Commission (NCC) and the famed Digital Mobile Licence (GSM) spectrum auctions that resulted in Econet (now Celtel), MTN and M-Tel acquiring exclusive GSM licenses. The policy later secured legislative backing two years later, and was encapsulated in the NCC Act of 2003.

On the other hand, rather than implement the power policy with the same speed displayed in telecommunications, we began a round of ‘government magic’ and elaborate abracadabra which ensured that the more we looked, the less power we saw! The Electric Power Sector Reform Bill which was sent to the National Assembly in the same year-2001-stayed there until it was passed into law in 2005, four whole years later, which is equivalent to the full term in office of a democratic regime! Meanwhile the government made motions of carrying out the preliminary steps which could be executed administratively, before the Bill was passed into law, such as the administrative unbundling of NEPA as a precedent to the legal unbundling after the bill became law.

The significant thing is that while the Bill was held down at the National Assembly seemingly by mutual consent of the Presidency, the people in charge of the power sector and the legislature, contracts could be awarded by the bureaucrats in NEPA and the Ministry of Power and Steel. Today while we know that huge sums of money were expended, it is less clear where the money went, or what value Nigeria has derived there from. Eventually when the Power Sector Reform Act was passed, industry watchers (such as your columnist) naively heaved a sigh of relief thinking alas, we had a sustainable model for power sector reform that government was legally mandated to implement. Well we should have known better! Since that Act was passed, the matter has gotten curiouser and curiouser.

The same government which had sent the bill, and waited four years to get it passed spent a while constituting the National Electricity Regulatory Commission (NERC) which was supposed to regulate the sector, began to talk about altering the composition of the to-be-unbundled entities mandated by the Act, and eventually stopped implementation of the Act. Instead as the 2007 elections and the ‘third term’ objective crystallized, talk of an emergency approach to the problems of the power sector emerged, and before we knew what was going on billions of dollars had been spent in a haphazard manner, and in not-a-little hurry on the so-called National Integrated Power Project. Today whether it was $5 billion, $10billion or $15 billion that was spent on that exercise, what all Nigerians will agree on is that there is likely to be significantly eroded value-for-money in relation to that spending.

Now one thing I am certain of is that if $5billion had been spent by the private sector on power or anything else for that matter, it is very unlikely that we would all be standing askance wondering where all the money went! Indeed the fact that we are arguing about how much was spent (such that one important functionary had to be relieved of his duties) demonstrates the peculiar nature of spending in the Nigerian public sector. Surely MTN and Celtel, Oando, GTBank and Dangote Group all know exactly how much they have spent on any one initiative, in any time period. Meanwhile rather than implement the carefully thought-out provisions of the Power Sector Reform Act, we have spent the years since 2005, and since the coming to office of the Yar’adua regime in May last year, pretending to be searching for a policy framework to address the sector.

Under the Act we should be proceeding to privatisation of the unbundled units of PHCN. The old NEPA has today been broken up into one transmission company, 11 distribution companies and 6 power generating companies, making a total of 18 entities in all. The Act deals with the fundamental issue of pricing. In the absence of a sustainable revenue structure, no sensible investor will invest in any sector. That is why no one except government will build refineries (except for exports) and that is why private power stations are problematic. So the Act contains the Multi-Year Tariff Adjustment (MYTA) which was meant to ensure that over a period of time electricity tariffs are adjusted to a level where there are reasonable returns to investors, and therefore a realistic prospect of foreign and domestic investment from the private sector.

The Act provides for independent regulation by NERC, provides for rural electrification which may not be commercially attractive and concessioning of the sole transmission company to competent private management. We have so far failed to proceed with any of these stipulations (which by the way are legally mandatory ala rule of law) and instead are prolonging the notion that no one knows what is to be done to remedy power failure in Nigeria. It is the same with the solid minerals sector, another sector that offers the prospect of huge investment, wealth generation, employment and taxes to the Nigerian nation. Early in 2007, I was a speaker on Channels Television’s Sunrise Programme, and the topic was education reform.

My sincere opinion was that in the time available, it would be unlikely that Oby Ezekwesili who had moved from Solid Minerals to Education in the twilight of the Obasanjo regime, would be able to complete the ambitious reforms she had conceived in the education sector. I commended her for bringing up the important subject of education reform, but expressed my preference- it would have been useful if she had stayed in solid minerals to finish the reforms she had initiated in that sector. I recall that I was not yet out of the TV studio when Oby’s call registered on my phone, and we had a long debate on the appropriateness of my views. Unfortunately since Oby’s exit from Solid Minerals, the reforms in that sector have stagnated in spite of the fact that a Mines and Minerals Act was also passed, and the uncompleted education reforms have been discarded. Today no one knows for certain what is going on in solid minerals as conflicting reports of cancellation or non-cancellation of mining licenses are bandied about. Sensible investors will stay away until the confusion is resolved.

Agbaje is Senior Consultant/CEO of Resources and Trust Company (RTC), a Strategy, Consultancy and Business Advisory Firm.