A new vision for the power sector – By Yakubu Lawal and Yetunde Ebosele

3 Comments » July 23rd, 2008 posted by // Categories: Energy Development Project


July 21, 2008


A new vision for the power sectorBy Yakubu Lawal and Yetunde Ebosele

With government’s slow approach to addressing the near collapse state of the power sector, it is feared that the recent probe of the sector, over the alleged $16bn investment during the last administration, may truncate government new resolve in tackling the energy crisis.

Even before he was voted in as President of the Federal Republic of Nigeria, Umar Yar’Adua had indicated at several fora that he would declare a state of emergency for the power sector.

More than one year on the saddle, the promise is yet to materialize, while Nigerians have continued to groan under system collapse due to low power generation and incessant outages, which have paralysed social and economic activities in the country.

But it seems a glimmer of hope is in the offing, as indications emerged that Yar’Adua is set to declare a state of emergency in the Nation’s power sector. A flurry of activities have since commenced in that direction.

Last week Secretary to the Government of the Federation (SGF), Alhaji Baba Gana Kingibe announced the transition board members for the Power Holding Company of Nigeria (PHCN). They include the Minister of State Energy (Power) Hajia Fatima Ibrahim, who will chair the board with Alhaji Bello Sulaiman as Executive Vice Chairman.

Federal government and other two tiers of governments have set aside $5.375billion (about n639.625bn) to rehabilitate and expand power generation, transmission and distribution including the Independent Power Projects (IPP) in the country.

Indeed energy, is one of the seven-point agenda of the Ya’Adua’s administration, but expenditure was put on hold until the Dr.Lukman reform committee submitted its report and recommendations. The report is expected to chart a path of development for the country’s power industry.

Lukman’s committee, which was inaugurated on September 7,2008, actually reviewed the power sector reforms and mapped out strategies to address the ailing sector which should act as catalyst for economic and national development.

Besides, the committee also looked at the performance of ongoing power sector reforms initiated by former President Olusegun Obasanjo and eventually drew up a power sector master plan that will provide for short, medium and long term electricity requirements of the country.

Having spent six months consulting with stakeholders in the sector, the committee, among other things, recommended the strengthening of the PHCN through the establishment of a coordinating body at its headquarters.

International consultants on electricity such as the General Electric (GE) and South Korea Electric Power Corporation (KEPCO), were also engaged to determine the way forward for the industry.

Despite all these preliminaries, the question most Nigerians are asking is- when will the country achieve stable power supply?

This question becomes apparent considering the recent system collapse, due to low power generation and the fragile nature of our national network as well as incessant outages day.

While the President believed feasible results will only manifest as from 2011 when generation would have become steady at 10,000Megawatts.

The committee, in the report submitted to the Presidents a few months ago, recommended that funding be sourced for the execution of all NIPPs, estimated to cost N870bn, an indication that government will still be the key driver of new investments in power generation, transmission and distribution.

The government of former President Obasanjo had leaned towards the private sector for power sector investments but regrettably poor regulatory framework, shortage of gas supplies and absence of commercial tariff regime and above all lack of co-ordination to power sector projects as a whole, stifled investments.

The Lukman committee also recommended the provision of 130million euros to complete the Shell Afam 600 megawatts IPP under the NNPC/Shell and Agip/Elf joint venture, which it said, could have been completed in the first half of this year.

The committee further recommended quick action on the establishment of coal-fired plants, which could add at least 3,000mw to generation in the medium term, and up to 8,000MW subsequently, and fast track action on the Zungeru and Mambilla hydro stations, expected to add 4,000MW to the national grid in the medium to long-term.

It also recommended that a yearly grant of N2bn be provided to fund the procurement of 36,000 metric tonnes of low pour fuel oil, enough for 30 days generation of 200MW from Egbin power station’s ST-4, in order to reduce the adverse effects of gas supply disruptions to the thermal power plants.

To address the gas issue, the committee said government should begin the immediate implementation of the Gas Supply and Pricing Regulation and the Gas Infrastructure Blueprint.

These, according to the committee, will stimulate additional gas supply and address critical infrastructure gaps including the lack of connection between the East and West, and introduction of central processing facilities that will eliminate recurrent condensate ingress in pipelines.

The committee also recommended that Nigeria should never build a single circuit 330KV line and that all future lines must be double circuit to save space and cost.

To address the serious management and manpower issues identified at PHCN, the committee recommended that managers with good understanding of the system be engaged to run it, while training centers to be known as National Power Training Institute for staff, are to be revived, adding that the Research and Development department in PHCN should be resuscitated.

The committee based its recommendations on the factors it identified as accountable for the parlous power supply situation.

These include insufficient power generation infrastructure, poor maintenance culture, inadequate funding, gas shortage, obsolete equipment, weak and inadequate network coverage and substandard distribution lines.

It also identified poor billing system and unwholesome practices by PHCN staff and poor customer relations as some of the problems confronting the power sector.

The committee pointed out that the targets set out in the reform program initiated by the Obasanjo administration were not realized due to unresolved staff pension matters and low morale on the part of the workers. The failure of the government to clearly define the workings of the Rural Electrification Fund and the establishment of the Consumer Protection Fund among other regulatory shortcomings were also addressed by the committee.

Other recommendations of the committee include,

. The need to maintain an on-going basis a strategic stock of LPFO at Egbin to minimize the adverse effects of gas supply disruptions, it thus advocated a yearly grant of N2bn to fund the procurement of 36,000 metric tons of LPFO enough for 30 days generation of 200MW from ST-4, the only unit presently available on LPFO,

. The need to ensure that the current demand estimated at 10,000MW is met in medium term,

. Implementation of the proposed Calaber-Ajaokuta gas pipeline and the need to fast track rehabilitation works in the power stations across the country to ensure their conclusion on short-term basis.

To ensure that all the recommendations is fast tracked, the committee called an immediate meeting of all stakeholders, to view the report and adopt the master plan as the Electricity Master Plan for the country.

The House of Representative Committee on power, under the Leadership of Ndudi Elumelu, had queried all parties involved in the alleged mismanagement of funds under the guise of project execution to a public hearing to state their side of the story.

Besides, the committee had also conducted a tour round the various sites of the projects in the country. During the public hearing and the subsequent tour, Nigerians were shocked at the revelation leading to the award and execution of the power projects under the NIPP scheme.

From cases of unaccounted funds released to unqualified companies/contractors, lack of due process in the award of the projects and bare project sites to mention but a few, many Nigerians are disturbed by the misfortune that has bedeviled the power sector.

In a move to tackle this problem, Federal Government, through the Chief Economic Adviser to the President, Tanimu Yakubu, had estimated that Nigeria would need about N117 billion to establish three central processing facilities for gas production in the country. The facilities to be located in the Niger Delta, is expected to be able to process upstream gas, extract liquefied petroleum gas and transmit dry gas to the domestic market.

The facilities when constructed, according to Yakubu, would ensure efficient delivery of natural gas to the entire domestic market for power generation and industrial development.

He attributed the shortage of gas to the lack of integrated planning between gas production and electricity generation.

The public sector funding and private sector investment was projected to achieve 6,000, 10,000 and 16,000 mega watts by 2008, 2009 and 2010 respectively. Other key targets and goals to be achieved in the short-term plan as being projected by government include the reduction of technical and commercial losses estimated at between 40 per cent and 50 percent of electricity generated.

Raging controversies over the approval of money and delayed implementation of the power plant projects have left every patriotic Nigerian in a confused state.

Nigeria has about 6,000 megawatts (MW) power generation installed capacity but currently down to about 3,000MW compared to 25,000 MW needed in the country. Despite Nigeria’s huge power generation and consumption profile, poor maintenance culture brought the national grid to near total collapse.

Basically the problem of power supply was not limited to the generation side alone, as the transmission and distribution arms of the power sector also had a very rough and fragile status.

The existing IPPs were expected to contribute 750MW by 2007 while on-going projects to account for 1,462MW by 2007 and 4,544MW by 2010.

A new vision for the power sector in Nigeria was envisaged to include about 15,000 kilometres of new transmission lines. This development prompted the government in 2002 to award contracts totaling $1bn for three gas-fired plants at Omotosho in Ondo state, Papalanto and Geregu in Kogi state. Four of the power stations, commissioned at the tail end of Obasanjo’s administration, are expected to contribute 1,588Mw to the national grid. These power stations are located in Geregu, Kogi state (414MW), Omotosho thermal plant in Ondo state (335MW), Papalanto in Ogun state (335MW) and Alaoji in Aba Abia state (505MW).

In a swift reaction to the state of the sector, Nigerians have called on President Yar’Adua to commence construction work on the projects, while the investigation goes on. This was based on the President’s promise that he was going to declare emergency in the sector to facilitate the development of the power sector.

While recently examining the past year of his administration, stakeholders have scored the president low, expressing fears that the federal government may fail to achieve its vision 2020 without a viable power supply to boost industrialization.

President General of the Trade Union Congress (TUC), Mr. Peter Esele said; “That we have been under PDP government for nine years. Nine years is enough to at least address some of these problems like power. Nine years is enough for government to ensure that we have adequate supply of power. Talking about the about the real sector, I will say how can the real sector improve or grow when there is no power. So, if you ask me, I will say the real sector is going into extinction. It is surviving. And those that are still in operation live on generators.”

He continued: “We pay our taxes, and we expect government to provide all this infrastructure, because that is what we have government for. For government to put resources together and then solve the problem that will serve as a catalyst for the development of the society and the country.”

World Bank has attributed the high cost of investment in Nigeria to electricity crisis. Mr Steven Dimitriyev, the bank’s Senior Private Sector Specialist said Nigerian enterprises still faced hostile environment characterised by high indirect cost, which depresses value added.

“Electricity crisis is the most important infrastructure bottleneck in Nigeria today. It is the main driver of Nigeria’s high indirect cost. On the average, 10 per cent is often recorded by Nigerian companies as overhead cost due to lack of public power supply. In a year to a typical Nigerian firm is awash with power outages while over 85per cent of them now run on generators.

And, as Nigerians look forward to this bold step in tackling once and for all the protracted problems in the power sector, it is feared that the recent probe of the sector, over the alleged $16bn investment during the last administration, may truncate Yar Adua’ s aspiration for the sector.


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3 Responses to “A new vision for the power sector – By Yakubu Lawal and Yetunde Ebosele”

  1. Kelvin Uwaibi says:

    The epileptic nature of the power sector in Nigeria no doubt has created angst in the country. In my view, it has a psychological disdain for the Nigerian populace.

  2. Kelvin Uwaibi says:

    The epileptic nature of the power sector in Nigeria no doubt has created angst in the country. In my view, it has a psychological disdain for the Nigerian populace.



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