Like a child looks up to his father and hopes to be one someday, several African nations remained the envy of Nigerians for donkey years mainly for one reason; poor mobile telecommunication. Many indeed hoped the days would come where mobile phones become an affordable commodity, thankfully those days are here. This is due mainly to the privatization of the telecoms sector. This article aims to compare the privatization exercises of both the telecoms and power sectors and highlight key lessons learnt which should be implemented by the power sector to ensure privatization produces similar results.

The telecoms sector privatization has brought about tremendous benefit to the nation’s economy with the telecoms sector producing a GDP contribution of 6.97 trillion naira in 2013 (8.68% of the economy) and over six thousand direct and indirect employment opportunities. This has also created the foundation upon which several other online businesses (e.g. Jumia, Konga etc.) and mobile money banking solutions have thrived. It is however worrisome that despite an estimated expenditure of over $20billion by the Federal Government, Nigeria’s power sector still appears to be in the doldrums. Several reasons are responsible for the poor post privatization results but this article shall focus on three:

Ineffective Industry Competition

Eleven (11) Distribution Companies (DisCos) and six (6) Generation Companies (GenCos) were the results of the power sector privatisation exercise. This in stark comparison to the three (3) licenses initially issued to MTN, ECONET and NITEL in the telecoms sector. At first glance, one would imagine the results would be much better within the power sector due to an extensive geographical coverage. Alas, this is far from reality.

Presently, each DisCo covers a specific geographical area e.g. Lagos mainland and island are covered by Ikeja Electricity Distribution Company (IKEDC) and Eko Electricity Distribution Company (EKEDC) respectively. Upon closer analysis, this is an absolute recipe for failure. This effectively means the DisCos are guaranteed customers whether or not they perform efficiently. To top it off, there is a monthly fixed charge (currently 750 Naira) levied on all customers. In a situation of regular power supply this charge is understandable. However, given the present predicaments, the charge currently appears a compensation for mediocrity.

The power sector needs to urgently be reworked to ensure competition is created amongst the organisations which deliver power to the end users. Thus, the introduction of a fourth link in the power delivery chain called ‘supply’ should be introduced; generation, transmission, distribution and supply. These supply companies would be responsible for delivery of power to the various homes and should be empowered by legislation to encourage embedded generation. These companies would use existing distribution infrastructure but plug in new capacity into the regions they serve through embedded generation. Each state would then be encouraged to have at least three (3) supply companies (depending on size and population).

The notion that a nation which presently has an estimated 5,000MW generation capacity and 7,000MW transmission capacity would suddenly attain its ideal generation target of 170,000MW (based on a population of over 170 million people) through overnight gargantuan power projects with a corresponding transmission capacity is a mirage which must be corrected urgently.

The ripple effect of supply companies competing against each other for market share would lead to rapid establishment of several embedded power plants. A 20MW solar plant can be completed in as little as six (6) months! Competition in the telecoms sector brought about per second billing, drop in call rates, and highly reduced data bundle rates. Similar results in the power sector could be achieved if only the right framework for competition is created.

 

Insufficient International Participation

South Africa, Zambia, Nigeria, Abu Dhabi were all adequately represented by MTN, ECONET, GLO, and Etisalat respectively to name a few in the Nigerian Telecoms sector. It is a bit sad to note that same could not be said of the power sector. A great example is Ameprion Power Distribution Ltd. chaired by Oil Mogul and billionaire Femi Otedola(Forte Oil majority owner). Forte Oil owns 57% of Amperions equity, BSG resources 38% and the world’s largest power operator Shangai Municipal Electric Power Company (SMEPC) owns 5%. Clearly there is a limit to how much drive SMEPC would give to this initiative knowing fully well the value of its equity. Similar situations exist across board in the Discos and Gencos which are majorly owned by politicians and Nigerian business men. Let us be clear, the participation of Nigerian entrepreneurs making big strides in this sector is certainly a welcome development but not at the expense of progress. There are two major benefits of significant international participation; knowledge transfer and increased international funding.

Sadly our local financial institutions tend to provide medium term funding for long term projects. The presence of the likes of EDF(France), PowerGen(UK), Duke Energy(U.S.) etc. would ensure that the international funding space is more aware of the happenings in this sector and are more likely to fund businesses whom they have dealt with in the past and who have a track record of success in the power sector. It would be very difficult at that stage for international financiers to fund foreign owned businesses and not spot the opportunity in others. (Government regulation could also be created).
Asides from funding, global power sector players would bring a wealth of knowledge and global best practices which could be shared in the industry. Their presence would create room for staff poaching and also drive an influx of Nigerians engineers abroad back home. This does not by any means undermine our local engineers but fact remains that the present practices are far from yielding the desired results. We need to advance our local knowledge and capabilities. Sir Isaac Newton once said ‘If I have seen further than others, it is because I stood on the shoulders of giants”. Our power sector needs to urgently find some giants whom we can stand on to ensure visible progress is made.

 

Over Reliance on Government for Fuel Supplies

Although privatised, several key elements continue to remain in the control of the government. However, the privatisation of the telecoms sector involved a total handing over of all government functions to the Telcos to handle with the government maintaining mainly a regulatory role through the Nigerian Communication Commission (NCC). These sectors may have some uniqueness but, there needs to be less reliance on the government (except for regulatory functions) if the power sector privatisation is to yield the expected results. Presently 70 to 80 % of the nation’s generation are from thermal sources while the balance of 20 to 30% is from hydroelectric sources. Unfortunately, phase one of the Nigerian Integrated Power Project (NIPP) consists of about ten (10) power generation plants, all of which require gas to function. Worse still, the gas industry is still majorly dominated by government agencies like the Nigerian Gas Company (NGC) especially in the area of infrastructure (gas pipelines etc.). Thus, when there are major issues affecting gas supply, power generation is affected, this should not be.

Nigeria as a nation has too many resources to depend majorly on gas. Nigeria has an abundance of gas, hydro, biomass, solar energy and even coal! An ideal economy should have at least five (5) different sources of fuel actively supporting its electricity generation efforts. Despite being one of the major proponents of a green environment, the United Kingdom (UK) generates an estimated 28% of its electricity from coal (2014).

In 2014, over 30% or the equivalent of 480 million standard cubic feet per day (MMscf/d) of the installed gas supply capacity was lost to gas pipeline vandalisation; sufficient to generate over 1500 MW. Technically, it is close to impossible to steal gas from the vandalised pipes so one wonders the aim of the vandals if not for sabotage! The Nigerian government needs to urgently hand over this segment as well 100% to the private sector. Private players in the gas sector should be encouraged to handle gas supplies. This should also be the norm if other means of fuelling are chosen including coal, biomass, nuclear etc. No part of the power sector (possibly excluding transmission and regulatory functions) should depend on the government. If the Nigerian Telcos relied on the government to power their operations at various base stations across the country, I doubt we would have recorded the success we have today. In the interim plans need to be made to ensure that in the next five (5) years (or some other reasonable period) there is a balanced spread of fuel sources for power generation in the nation.

The privatisation exercise has indeed yielded some progress in the power sector but nothing compared to the rapid turnaround which was experienced in telecoms. A few pivotal lessons have been highlighted above with possible solutions where errors have been made. If implemented, it is believed that Nigeria can achieve stable power supply in the next four years (at least for 12 hours per day). At that point, we may truly be able to say Nigeria’s journey to Eldorado in the power sector has begun. Never did we think mobile phones would be so cheap, never did we imagine that someday video calls would be possible in Nigeria, never did we think that the average labourer earning less than 1,000 naira a day could afford a mobile phone but as they say; impossible is nothing. Nigeria can get to her power Eldorado only if she tries.

 

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Mojola Ola is a graduate of Electronic and Electrical Engineering from Loughborough University in the United Kingdom. He has worked on several energy projects internationally with Foster Wheeler Energy Limited in the United Kingdom where he began his career as a project electrical engineer after which he moved to Nigeria and has since worked with leading energy industry players including; Chevron, ABB and Schneider Electric Nigeria Limited presently where he plays a major role as a manager in the partner division.
Mojola is extremely passionate about contributing to the change in the Nigerian power sector and believes strongly that with dedicated efforts, Nigeria can experience stable power supply in as little as eight (8) years.
He engages actively in creative writing, reading and youth mentoring in his spare time.
Mojola is presently a member of the organizing committee for the upcoming Lagos Start Up Week – an event targeted at boosting the Nigerian start up eco system and would be anchoring the track ‘Building a Smart City’ (www.lagosstartupweek.com).