What Did We Say About Power?

Like other Nigerians, I have observed with outrage the revelations about the goings-on in the power sector in the last eight years. My anger is not just at all that had been wilfully done wrongly in the sector, but because it was all so avoidable-if only policy makers took some of the things written on this pages seriously. This week, we will do no more than highlight extracts of some of our past articles touching on the power sector, and leave our readers and policy makers to learn whatever lessons they wish.

The first extract is taken from an article published in 2006-“The contrast with Power has been nothing short of embarrassing. For several years, the attempt to solve the problems in NEPA followed the typical “action government” model-plenty of money, said to be in the region of $1billion pumped into NEPA between 1999 and 2003 with no discernible result, until government realized the folly of that course of action and then returned to a search for right models. While the Naira rain was going on, there was a rational model encapsulated in an Electric Power Sector Reform Bill sitting on the shelves of the National Assembly for four years! I’m told the Bill was submitted in 2001 while the Act was passed in March 2005! Whose job was it to ensure passage of this law? Was there a conspiracy to hold up the bill while huge resources continued to be appropriated? Has there been any accountability for these resources, especially as Nigerians have received no value corresponding therewith?

I am a believer in the new model finally captured in the Act passed in March 2005-unbundling NEPA into generation, transmission and distribution arms, privatization of generation and distribution and investments in transmission accompanied with concessioned private sector management and a new regulatory institution-the Nigerian Electricity Regulatory Commission. So I personally think we finally got the model right, but as we saw with telecommunications, there is more beyond the model. There are people, regulators and institutions, private investments to be attracted, issues of transparency and accountability and there is political will!

Are these other variables right? Do we have the right people in charge in the power sector-at the Ministry, at the PHCN, in the new NERC? Have the managers of the sector been held to account for its performance? Is anyone actually explaining to Nigerians what is going on in that sector? …Recently millions of dollars have again been injected into public sector power projects in the Niger-Delta. With predictable results!!!” The article was titled “POWER FAILURE”, published on May 19, 2006.

At the end of the Obasanjo regime we published an assessment of the regime in June 2007. We said, “Beyond the oil marketing and telecommunications sectors however, the government in its first term had no clear direction concerning economic policy. The regime failed to address two major imperatives of the Nigerian economy-power and transportation infrastructure. It failed to apply the lessons of the telecommunications sector to power and transportation and simply put more money into the incompetent structures existing in the sector, money for which no discernible value can be seen today.” THE OBASANJO SCORECARD Part 3-Economy

In “Memo to Umaru Yar’adua” published on May 30, 2007 just after the President’s inauguration the previous day, we said, “The current state of things imposes three policy priorities on you-resolving the crisis in the Niger-Delta; addressing the failure in the power sector; and extending the economic reforms to the social sector-to the people… The power situation is one you have correctly described as an emergency. Indeed that emergency ought to have been declared in 1999. But what happened? While there were lofty declarations of an intention to radically address the situation, the basic tool for restructuring the sector-the Electric Power Sector Act (EPSA) was held up in parliament from 2001 and only passed in 2005. Meanwhile huge resources were sunk into a bottomless pit called NEPA. I believe there was a conspiracy by vested interests in the executive, legislature, NEPA, and industry groups against power sector reform, and in effect against Nigeria. Alhaji please note that you may be confronted by, or unwittingly drafted into this conspiracy. I am a believer in the basic model encapsulated in EPSA-unbundling NEPA, privatising generation and distribution, investing in the transmission network and finding private managers for it, creating a regulator-Nigerian Electricity Regulatory Commission (NERC) and adjusting tariffs through a Multi Year Tariff Adjustment (MYTA). The argument of course is that emergency measures may be required because many of these measures will bear fruit only in the medium to long term. While that may be true, I urge you to proceed firmly and resolutely with the framework in EPSA while seeking complementary short term remedies to increase generation and transmission capacity. I am very concerned about “value for money” from the so-called National Integrated Power Projects (NIPP) which was rather hastily conceived and implemented based upon a yet untested model from the Rivers State Government Omoku Plant. While in principle I do not object to emergency efforts to boost generation through barge IPPs, and the ones being constructed in the Niger-Delta, I worry that corruption may reduce the value from such hasty contracts.”

Finally just last month (March 5, 2008 precisely) in “Unlocking Power and Solid Minerals Sectors”, we said, “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.”
We wait to see if the new power policy direction being considered by President Yar’adua will benefit from history.

Agbaje is Senior Consultant of Resources and Trust Company (RTC) a Strategy, Consultancy and Business Advisory Firm. RTC POLICY is the policy, government and political consultancy arm of RTC.