- Post 08 August 2012
- Last Updated on 10 August 2012
- By OLUMIDE ILUYOMADE
In 1959, at the onset of independence, Nigeria was already a big and populous nation. Even then, the expectation and potentials for the young nation was considerably high. Such high expectations were not unfounded considering the magnitude and depth of natural resources, human resources and talents with which the nation had been gifted.
Young, enthusiastic and with an estimated population of 66 million in 1960, Nigerian leaders seemingly understood her immediate needs and were able to find the resources to start developing an industrial and economic footing by building strategic industries and primary infrastructures – notable amongst these were power generation plants and dams! By 1968, Nigeria’s total output through the Electric Corporation of Nigeria (ECN) and the complimenting Niger Dam Authority (NDA) was 1600MW and was considerably ahead of its sub-Sahara African counterparts.
The ECN and the Niger Dam Authority (NDA) were merged to become the National Electric Power Authority (NEPA) with effect from 1st April 1972. At the peak of its performance in 1982, NEPA had an installed capacity of 5553MW of electricity. There were seven (7) power generating facilities in the nation, three (3) of which were hydroelectric stations while the rest were Gas turbine and Thermal stations. The seven power generating facilities are listed as follows:
- Kainji Dam – Hydro Electric Power Station (760MW)
- Shiroro Dam – Hydro Electric Power Station (600MW)
- Jebba Dam – Hydro Electric Power Station (540MW)
- Egbin Station – Thermal (Steam Turbine) Power Station (1320MW)
- Delta Station – Gas Turbine Power Station (913MW)
- Sapele Station – Gas Turbine Power Station (1000MW)
- Afam Station – Gas Turbine Power Station (420MW)
In spite of its taunted capacity, NEPA was never quite able to make use of its full capacity and often generated at much lower outputs. This was due in part to climatic unpredictability – Hydro Electric plants rely on good rainy seasons and require high water levels to deliver at optimum capacity. Of bigger significance, however, was the fact that installed facilities were often neglected and poorly maintained. Machineries, equipments and facilities all fell victim to poor maintenance culture, inept technicians, poorly trained engineers, grand theft, pilferage, incompetent management and a politicized and corrupt administration.
By the year 2000, successive Administrations had consistently neglected to develop any meaningful national policy on Energy & Power. The same had also failed to invest in new Power Generation capacity to keep up with the fast growing economy and population. Existing infrastructures had been pushed beyond design limits with little or no attention being paid to maintenance needs and upgrades. NEPA’s output was now down to somewhere below 3000MW!
The poor service and inconsistent supply for which NEPA had hitherto been known in smaller cities and rural areas soon began plaguing major urban cities such as Port Harcourt and Lagos. It was no surprise therefore when limited availability of reliable power, was listed as chief amongst a host of other problems that caused the nation’s economy to nose dive! By the year 2006, NEPA was reported to generate as little as 1800MW for a population of 140 million citizens! In sharp contrast, South Africa which produces most of its electricity by coal had an output of 23,000MW in 2004 for a population of 45 million citizens!
The failure of the federal government to organize and invest in the power sector has had a devastating effect on the nation’s economy, one that is at the very least, immeasurable! Nigeria’s economy has been completely devastated and decimated over the past 30 years and thus our long term viability as a Nation has been seriously jeopardized! Factories and industries shut down and closed their doors, others simply divested, disinvested and moved elsewhere! Bringing a potentially diverse and vibrant economy to a screeching halt and plunging the denizens into brutal and merciless vortex of economic hardship!
Nigeria’s quest for industrialization was at this stage obviously in shambles! The few surviving industries and struggling businesses were subjected to even more merciless pounding from NEPA. Subsequently, factories and industries became plagued with debilitating bouts of high production costs due to the incessant use of back-up generators as a main power source!
It was a question of time before low productivity and unprofitability led to massive business failures, huge lay-offs, economic retrogression and finally, sky-rocketing prices and massive inflation on essential commodities! The final nail in the coffin was to be the huge incidences of Capital flight which ultimately followed thus completing the cycle of imbecilic and mindless self-destruction that had come to characterize Nigerian government’s performance!
The Energy and Power quest in Nigeria was never quite an accomplished objective. Neither could it have been considered remotely finished or adequate with regards to available demand. But much rather, it was a process in development, one that could reasonably be considered to be well on its way to notable success if the earlier trend had continued!
The hard work and vision that gave rise to an early success and advantage had become misplaced in an era characterized by poor leadership, misplaced priorities and directions, non-existent policies and acute administrative incompetence. The sad state of Nigeria’s infrastructure today, is a lasting and true testament to the impact and devastation experienced through the last 30 years of misrule, abuse and mismanagement!
That Nigerians have been subjected to so much suffering from something as simple as inadequacy of power supply is an unspeakable crime! It is unjustifiable to speak of frequent blackouts and indeed, lengthy periods of blackouts in a nation that is literally floating on energy resources. That a Government, any Government, finds itself unable to solve the problems of energy and power demand in an environment that is riveted with abundant natural energy sources is unforgivable and is a testament to the acute ineptitude and incompetence of leadership that the nation has been saddled with.
Nigeria is a nation that is especially blessed with energy resources such that there are few countries in the world where the prospect of power generation and power delivery could be less challenging. In Nigeria, the question of power generation should not be one of how, but much rather it should be a question of which energy source to use. With an abundant reserve of Fossil Oil and an even more abundant reserve of Natural Gas, the nation should be awash with all kinds of power generating plants!
Beyond petroleum resources, we also have an abundant reserve of coal and lignite that has been abandoned and under-utilized for decades! It is also worthy of note that coal is still the leading source of power generation all over the world! This reality is due to the fact that huge coal reserves are widespread and abundant, coal is also easy to transport and requires no special facility or infrastructure and coal can be mined cheaply and for that reason remains a relatively inexpensive source of energy.
Furthermore, Nigeria is blessed with several water resources that could be tapped and used for hydroelectric power generation – although this is a capital intensive alternative, it does have the advantage of being able to produce unparalleled low cost electricity. For the sake of novelty, Nigeria is only a few hundred miles north of the equatorial belt and thus is naturally privy to a huge and consistent dose of sunshine, 12 months a year! This makes the Nation an ideal and prime candidate for the energy choice of the future – Solar power!
I might also mention that although Nigeria is neither nuclear-capable nor nuclear-seeking, it is still known to have a solid reserve of uranium (the energy source for nuclear power) – something that may come in handy in the future (when we may have hopefully become a matured, competent and self-sufficient nation). Finally, with a huge population, Nigeria produces vast amounts of organic waste especially in the overtly populated urban centers. For many decades now, urban and agricultural wastes have been used in several parts of the world as viable energy sources for urban and rural power generation.
If energy sources and the technological know-how of humanity is not the problem, then what is the problem? Where does the persistent issue of incapacity stem from? What is responsible for the apparent incapacity and inability of the Government to provide a basic but mandatory service for the well being of its people and the health of its economy? The problem as usual, can be traced back and it goes back to several notable inadequacies. However at the core and bottom of all these layers, lay three irrefutable reasons for the current failure and they are as follows:
- Failure of leadership and the viral corruption that emanates from the top, thus consuming all public institutions and compromising the government's ability to effectively govern.
- Prevailing culture of acute negligence and dereliction of duty which is further excerbated by a thriving culture of corruption thus allowing for a total lack of accountability on the part of public officials with regards to public funds!
- Failure to have a clear understanding of the importance of a manageable and viable National Energy & Power Policy. Hence the failure to maintain, pursue and implement a cohesive and intelligent course of action.
Even as we speak today, the Federal Government has yet to find the need or the time to develop a comprehensive policy towards Energy & Power that is in tune with the demands, needs and realities of the economic potentials of the Nation. We continually hear incumbents voice and reiterate a policy of privatization and private capital investment in the energy and power industry but as yet, we have not seen any worthwhile effort to actually forge, develop and implement a comprehensive policy – that which is the legal framework and administrative footing that allows this vision to be realized!
A National Energy & Power Policy is the actual building block, the process that will actually give wings to the underlying objectives that is being voiced! The real work and the fundamental role of Government is to understand the long term need of its constituency and thus create and implement a useful policy by due process, one that is workable, viable and feasible - one that is scalable, durable and accomplishes the overall agenda and objective of the Government.
There can be no meaningful economic stimulation or invigoration unless the critical issue of Power generation and distribution is resolved. It is also true that there can be no resolution to the Power supply problem unless the FG shows single-minded focus and commitment, investing huge resources on the short-term basis while fostering a long-term plan to divest and engage private enterprise in the sector. I must however repeat that there could be no private enterprise involvement unless the FG takes the time to foster, develop and implement a National policy on Energy & Power - this is the legal footwork and administrative blueprint which determines and defines the platform, objectives, scope, attributes, content, incentives and inter-relations of stake-holders and participants in the power sector.
Finally, there can be no long term success in the Power sector unless the critical and equally debilitating issue of Energy (Fossil fuel, Gas and Coal) production, distribution and management for local consumption, is simultaneously resolved in a comprehensive, wholesome and integrated manner! The two problems are inalienable and interwoven and hence, failure in one sector ultimately leads to the failure of the other! It is imperative that the FG recognize the urgent need for a prudent, expansive and comprehensive Energy & Power policy - for it is not only one of great economic importance whereby sustainable growth and development can be achieved, but it is also one of fundamental national security!
If the Nigerian Government decides that it wants to privatize or even de-centralize the power industry, it must of necessity create a legal framework and administrative policy guidelines - something from which, would-be participants and stakeholders can make plans, invest in and adhere to. It is also mandatory for Government to define its own rules and guidelines for the benefit of easy management and enforcement by whatever organ has been given oversight over the industry. Until such a time as this, when detailed legal framework and administrative guidelines are completed and divulged, there can be no meaningful investment or development carried out by any organization or entity – you cannot play the game unless you know the rules!
The solution to the dilemma is obvious and needs no further pontification. One does not need to be a genius to know and understand the urgent need for great investments into Power and Energy Production. However, like in most things, the devil is in the details, otherwise a misguided and misdirected effort mounted in such a direction will of certainty end up being a colossal waste and a white elephant project. Nigeria is a country that has suffered enough of such useless and wasteful projects.
It is therefore imperative that if and when the Nigerian government makes a serious decision to confront and overcome this challenge, it does so with a strong and insightful plan, with unwavering commitment and conviction. That it does so with purpose and determination. The tough decisions and needed resolutions for the problem of power and energy is what nation building is all about! The toughness, painful cost and perseverance required for its successful implementation is not much different from the birth pangs of a new born child – it is what bonds mother and child! This is the blast furnace through which leadership will either be fire-tested and refined or be totally consumed. It is the process that will either forge an alloy of great strength and unity out of the diverse constituents of Nigeria or it will simply disintegrate and dissolve the entity called Nigeria. Nigeria has come to the cross road and the luxury of avoiding the problem no longer exists! At this point in the Nations development, leadership must either confront the problem or be consumed by it!
For this reason, I have taken the liberty of drawing up a proposal for a National Policy on Energy and Power. One that is expressly designed to address the complex issues of implementation, cost control and sustainability. One that is expansive, viable and scalable - being effective and effectual in scope and implementation. Truthfully, this National Policy on Energy & Power will take nothing less than 15-20 years to implement fully! But then again, 20 years is but a breeze in the life of a Nation. I will go ahead and publish a summary here, the details of which will have to be divulged in a second part of this write-up because of sheer volume.
1. STABILIZE POWER AND ENERGY OUTPUT:
PHASE 1a – Renovate and Restore existing Power Plant facilities to original states of optimal performance and production output.
PHASE 1b – Renovate and Restore the four (4) existing Oil Refinery facilities to original states of optimal performance and production output.
2. RESTRUCTURE AND RE-ORGANIZE INDUSTRY:
PHASE 2a - Break up and separate responsibilities in the current Power holding company (PHCN) into multiple companies and agencies. I suggest that the industry should be broken up into 4 different entity types:
- Power Generating Companies (PGC)
- Power Distribution Organizations (PDO)
- National Power Grid Administration (NPGA)
- Nigerian Electricity Regulatory Commission (NERC)
PHASE 2b – Restructure the 4 newly renovated Refineries such that each one is offered on a concession basis to experienced and qualifying refinery operators. The terms of the relationship will be defined as an integral and essential part of the National Energy & Power policy. It must of necessity ensure the following:
- Refinery concessionaires are assured of a supply of crude oil purchased directly from NNPC at a low flat rate that is commensurate with local price level.
- Refinery concessionaires are assured a pre-negotiated and determined margin on each liter of finished petroleum product (example: N5 on every liter of fuel)
- Refinery concessionaires are mandated to sell their excess production output to the Federal Agency for Strategic National Fuel Reserve
- Exportation of finished products directly is prohibited and can only be done through the Federal Agency for Strategic National Fuel Reserve.
3. EXPAND POWER AND ENERGY BASE FOR GREATER DEMAND:
PHASE 3a – This phase is two pronged and should be achieved as thus:
- Each Power Generating Company is restructured and offered on concession basis to qualified and experienced Power Plant Operators. In this new arrangement, Power generating Companies (PGC) will be selling electricity to Power Distribution Organizations (PDO) at a pre-negotiated, (NERC) endorsed wholesale price for onward transmission to the end-users.
- Each Power Generating Company (PGC) will also be assessed on individual merit for expansion programs which will enhance and greatly increase its power output. This federal government financed initiative will be designed to increase National power output from the currently installed 5,500MW to 10,000MW of power.
PHASE 3b – This phase is also two pronged and should be achieved as thus:
- Each of the 4 concessioned refineries having been operated for 36 months according to agreement will now be restructured for offer as a public liability company. The Federal government would disinvest to the tune of 60% of its investment by offering shares to the Nigerian public through the stock market.
- It is expected that the guaranteed profits and the stability of market hitherto accomplished for Oil refineries would encourage multi-national Oil Companies to invest in at least two more sizable Oil refineries. However, should this incentive fail to attract the needed investment, The FGN will have no choice but to construct two more facilities with a cumulative installed capacity that is not less than 160,000BBD in output. Hence total National output should be just over 600,000BBD (Barrels per day).
- **Notably, it is imperative and prudent for Nigeria to have an excess capacity in refining crude Oil, thus becoming a big net exporter of finished petroleum products to help boost and diversify our economy. This initiative will facilitate for Nigeria, a lion’s share of the neglected West African regional demand, hence incisively entrenching the Nation as a domineering regional power house!
4. LONG-TERM POWER OUTPUT INCREASE:
PHASE 4a – Embark on a massive, well articulated and simplified program for increasing National Power Output from 10,000MW to 24,000MW over a period of 10 years. This must be accomplished by strategically pinpointing the use of locally available sources of energy, the type of which depends on the individual location of the power plants. This not only makes practical and economic sense, but is also an integral part the strategy to build a national power grid infrastructure that is robust, flexible and not overtly dependent on any single technology or material input. Hence, Nigeria’s power-grid and power plant infrastructure would be comprised of diverse constituents such as:
- Lagos-Ogun – Gas turbine and Thermal Cogeneration
- Western Region – Gas turbine/Coal Powered Thermal Stations
- Delta-Calabar Region – Gas turbine and Thermal Cogeneration Stations
- Eastern Region – Coal Powered Thermal Stations
- North West Region – Hydro-Electric Power Stations
- Middle Belt Region – Coal Powered Thermal Stations
- North East Region – Hydro-Electric Power and Coal Powered Thermal Stations
- Ondo-Mid-West Region – Gas turbine and Thermal Cogeneration Stations
PHASE 4b – Each of the listed Regions above constitute the geographical area covered by a single National Power Grid Administration (NPGA). Hence you have a broad swath of several Power Generating Companies (PGC holdings) in any single NPGA! Each Power Plant is concessioned to qualifying operators and Management firms upon completion for a period of 36 -72 months. Power plants are grouped and merged to form sizable Power Generation Companies (PGC Holdings). Hence a PGC Holding is a group of PGCs with either similar operational modulus or a group of PGCs with the same Management team or Operator.
5. DIS-INVESTMENT, PRIVATIZATION AND TRANSFER:
PHASE 5 – This is the final phase of this development plan. It is the phase at which the Federal government finalizes all the stages of its disinvestment plans. It must deliver the infrastructure into the hands of the public-private industrial complex that has been carefully developed and cultivated over the years. One that is robust and capably monitored for balance and continuous growth. At this stage, the FGN must do the following:
- Disinvest to the tune of 60% - 80% of all its investment in the newly built Power Generating Companies and PGC Holdings. The means for doing this is once again through public market share offerings through the stock exchange.
- The last two Refineries should be privatized through government stock offering. FGN would only keep 30% investment while recouping investment on the rest of the 70% capital stock. As such the Nigerian public will be the direct benefactors of such privatization drive.
- Federal Government should continue to maintain a policy of high incentives for private investments into both the Power industry and the Energy industry. Such incentives should include Government backed loans, import and export incentives, guaranteed market protection, stability and low risk assurance. The purpose of this would be to ensure an increase of Nigeria's Power Output to 30,000MW from 24,000MW. Also, to encourage the economy to shift from crude Oil production to finished petroleum products, further private investments should bring daily refinery capacity from 600,000Bpd to 1,000,000Bpd.
Details of the Energy & Power Policy summarized above will be enumerated in the second part of this write-up. I hope to go into the details of the layout - Certain aspects that are not critically examined here will be fleshed out and examined. The inter-relations and connectivity of the numerous and varying components of this policy will be further articulated and elucidated in Part (2) of this write-up.