PHCN: High Hopes, Poor Performance – Checklist Mag


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PHCN: High Hopes, Poor Performance




The little girl woke from sleep to the unfriendly darkness. She sat up
from her mother’s laps and surveyed her surroundings carefully. She
was in a dark room with her mother. However, her attention was fixed
on a lantern placed in front of her on a table. Staring at it the
lantern for some minutes, she asked her mother what it was. She told
her why the lantern had to be on.

The little child had never seen a lantern all her life. She was
brought into Nigeria from Holland a few hours before the incident. In
Holland, lanterns are a scarce commodity because electricity is
constant.

In another part of town, Seun thought about what his night would be
like. He was still in a heavy traffic jam and would need a good night
rest. He was sure that his sleep would be disrupted by mosquitoes.


Many people in Nigeria know what it is like to live without constant
electricity. The federal government has made promises time and again,
raising high hopes that there would be constant power but electricity
has been elusive for about a decade.
 Understanding the role of some organizations in Nigeria helps us to
appreciate the roles of those involved in the generation of power in
Nigeria. The Power Holding Company of Nigeria (PHCN) is responsible
for Nigeria’s energy generation, while the Nigerian Electricity
Regulatory Commission (NERC) is the regulator for the sector.
The two organizations must work alongside each other to set matters
right in providing sufficient electricity for all Nigerians. At the
moment, it is estimated that Nigeria is capable of generating around
3, 500 megawatts (MW) of electricity, which, when one considers its
importance, is well below the country’s consumer and business needs,
despite government investment of around 1 billion US dollars annually
in the sector.

Much of that amount of money had been sunk into the sector in the days
of the former President, Olusegun Obasanjo. Since the days of
President Jonathan’s assumption of office, government tried to
increase electricity capacity to about 10’000 MW by 2011. There was a
stern effort, which was geared toward producing 6,000 MW of
electricity since 2010, which also did not see the light of day.

In that same year, 2010, President Jonathan in June 2010 announced the
institution of a Presidential Action Committee on Power, which was
entrusted with the job of redeveloping of the electricity sector. The
president himself was very much involved in the process of solving all
the negative issues that faced the power sector. The Presidential
Action Committee on Power was chaired by the President, and a
Presidential Task Force on Power. Their job was to draw up new policy
for the future of the power sector, and to set concrete goals which
were to be achieved in the space of time that the present government
will still be in power.

Break up PHCN or Sell it!

According to an expert analyst on the issue of electricity generation
in Nigeria, Martin Ayankola, one solution under consideration is the
concession of electricity generating infrastructure to investors. He
suggested that PHCN be broken up into 11 regional electricity
distribution companies and six generating companies. Even if the
government considered selling PHCN, its infrastructure could bring the
government up to 7 billion dollars in revenues.

In 2010, the federal government hoped to pass the distribution
infrastructure on to state governments, while involving the private
sector in generation. Some of the major distribution companies ought
to be sold by the end of that year. Even some state government
indicated interest in purchasing those electricity distribution
infrastructures.

Expectations were high. It was as if the new plans for development of
the power sector would definitely succeed. But the Nigerian power
sector ended year 2010 on a poor note. News reports had it that just a
day after hitting 3,555 megawatts, power generation dropped to a bit
over 2,000MW on December 27, 2010 because of gas supply problems at
the Lagos Thermal Station, Egbin, which led to the shutdown of the
plant and the AES plant within the complex. Also, about two weeks
before the date, power generation was about 2,600MW, because of sundry
problems. Those scenarios underscored the fragile nature of the
Nigerian power industry as the Federal Government began to implement
the reform of the sector in last year.
When the power sector reform was put in place in 2010, there were
various reasons to see that the needed triumph would prevail.

The Road Map to Success

Even Lagos, the commercial nerve-centre of the country, which was also
privileged to host the power sector reform ceremony, received the
least attention as far as the distribution of electricity was
concerned in Nigeria. Lagos accounts for almost half of the total
power generated by PHCN all over Nigeria. No wonder, the state has
often been referred to as the ‘load centre’ of the nation.

What resulted from the reform of 2010? There was no improvement. In
fact, by the time the reform was being inaugurated, the country was
only generating between 2,500MW and 3,000MW. Power stations were
operated without giving attention to maximizing the use of the old
transmission lines, injection stations – all of which performed at low
ebbs during that time and up till now.

No one heard much about the National Independent Power Projects’
(NIPP) power stations. It was evident to Nigerians that they had been
duped again. The present administration just made myriads of promises
to enable it gain access to the corridors of power.

Over the years, Nigerians have had their hearts bogged down with the
same excuse: Lack of gas supplies – whereas, this country is a major
supplier of gas to other countries in Africa, and maybe to other
nations in Europe. Mechanical faults had also been cited in the past
as the reason for incessant breakdown in the ability of PHCN to supply
electricity. As a result of that, those stations that were built
primarily for supplying electricity did not operate. In 2010,
government was already contemplating selling some of those stations,
as if that was the main solution to the problem of generating
electricity for Nigerians.

The three major areas such as generation, transmission and
distribution are negatively affected, making the possibility of
providing electricity for Nigeria even more difficult. “The problem is
more in transmission now because the transmission system cannot even
evacuate more than 4,000MW, even if the country generates more than
4,000MW,” a top Power Holding Company of Nigeria’s official once told
the press.

In the power road map, Nigeria is targeting 14,000MW power generation
by 2013 and 40,000 MW by 2020. Nigeria currently generates an average
of 3,500MW against a demand in excess of 25,000MW.

What more is expected from the power road map? “In summary, a total of
$10bn per annum would represent a conservative estimate of the sums
that will need to be spent on the whole supply chain over the next 10
years in order to reach the modest target of 40,000 MW by 2020.” The
question is: Can Nigeria handle that?

When that statement was issued, some people were excited and they
praised the government and the project itself. It was hoped that the
masses would be carried along, every aspect or development of the
project would be made known to the public. Some analysts viewed it as
a major robust and refreshing development, one which was really
reassuring. However, one negative aspect was cited: will government be
able to implement the ideas it stipulated. That is an area in which
the Nigerian government at any time has shown much lack of will to
succeed. In spite of that, many remained positive about the new power
road map project.
Will Investors find it Profitable?

This leads to the question of how enticing it will appear for
investors to actually put their money down. Who will invest in a
sector that is ever-fraught with negativities? The Nigerian government
has the sole responsibility of making the power sector a viable means
of making profits. It is only this point that will encourage
investors, because there is a high risk of losing money if investors
put their money into the sector at this stage.

Already, we have heard that billions of naira had been sunk into the
sector and nothing has come out of it. Furthermore, there have been
reports of corruption and sabotage in the play of powers within
sector. Such negative things will not encourage investors to consider
the power sector in Nigeria as profitable area where they can invest
their money.

Secondly, the issue of tariff presents another hurdle. The price of
electricity has to be set right. There is a danger that if the price
is too high or too low, things will not work out well between the
producers and the consumers. So the urgent call these days to the
government is to regulate the price in such a way that it will benefit
all those involved.

A commentator said “We want a Nigerian Electricity Regulatory
Commission’s board that would be empowered to properly regulate the
sector. That is what will assure investors that government means
business. The regulator must deal with issues like tariff. “The tariff
issue is a major determinant of the success of the road map. If the
tariff is not right, nobody will invest. If investment in power sector
will not be remunerative, investors will move their funds to other
sectors.”

Already, the Presidential Task Force on Power has hinted that a new
electricity tariff will be announced soon. Nigerians are not so
comfortable with the idea. They feel already ripped off by the
activities of PHCN staff that go around, disconnecting electric wires
from homes that they themselves do not supply electricity to.

Many people keep complaining that PHCN asks for money but never gives
electricity. Nigerians wait for the time that government has scheduled
for the winding up of Power Holding Company of Nigeria’s operations.
According to the road map, the Federal Government will sell 51 per
cent of its stake in electricity distribution companies and thermal
power stations to investors, while it will grant concession to private
companies to run the three hydro-electric power stations.

However, in January 2012, fresh information came up that PHCN debts
have ran into billions of naira. The Nigerian Electricity Liability
Management Company Limited put the debts and liabilities of the Power
Holding Company of Nigeria at N340bn. It was disclosed that the
company hoped to generate over N4.29bn from the sale of PHCN
properties in 2012, and more than N23.5bn in 2013. 11,000 retired
workers were owed over N10.8bn in pension benefits and the amount may
soon increase. Other debts owed by PHCN came from the difference in
the cost of producing electricity by power generating companies and
the tariff paid by electricity consumers.
 Other liabilities come from creditors who supply cables and other
services used by PHCN, as well as liabilities to government agencies
such as the Federal Inland Revenue Service, among others.

Depressing Case Studies

As written in the other article, Nigeria hopes to buy electricity from
Ghana. It is a shameful thing that at a time when a country like
Ghana, with a population of about 21 million, generates, transmits and
distributes about 18,000 Megawatts, Nigeria, with an estimated
population of 150 million, is targeting a meager 5,000 Megawatts by
2011. South Africa, with a population of about 50 million, generates,
transmits and distributes 43,000 Megawatts of electricity. Brazil has
a population of 188 million and generates about 90,000 Megawatts.
Britain, Nigeria’s colonial master, with a population of 60 million,
generates, transmits and distributes 77,000 Megawatts. The United
States of America, a major business partner of Nigeria, has a
population of 300 million and a power output of 937,000 Megawatts,
while Germany, another trading partner of Nigeria, with a population
of 83 million, supplies 115,000 Megawatts of electricity to its
citizens.

Yet there is no doubt that without constant electricity for companies,
for households in Nigeria, this country cannot achieve its aims come
2020, when Nigerians hope to be among the top twenty richest people in
the world. Electricity is a must for the industrial transformation of
any nation. Without it, IT suffers; manufacturing will grind almost to
a halt.

One that is astonishing is the fact that processes are left to remain
for long. Since the president first created the Presidential Action
Committee on Power which met weekly with the President with the aim of
removing “any obstacles that may be on the way” and established the
Presidential Task Force on Power, headed by Prof. Barth Nnaji, a
world-renowned expert on electricity issues, no tangible results have
been felt about electricity in Nigeria.

The Bureau of Public Enterprises (BPE) in 2010 published adverts in
local and foreign media inviting prospective core investors to express
interest in the distribution firms unbundled from the PHCN as well as
the four thermal power stations and two hydro power stations in the
country and that as many as over three hundred firms across the world
have applied for acquisition of major stakes in the privatization of
the successor companies created out of the Power Holding Company of
Nigeria (PHCN). Yet, PHCN remains, like wounded behemoth merely
struggling to survive in the wilderness.

There is no doubt that the move of the president regarding power
reform is a positive one. However, Nigerians appreciate a speedy
process because not only individuals are concerned but the major
supporters of the nation’s economy are having a hard time.

What will the president tell those in the informal sector such battery
chargers, barbers, hair-dressers, video club owners, carpenters,
business centre owners, fashion designers, auto-mechanics,
auto-electricians, pepper grinders, welders, etc that are no longer
able to cope with the present situation? What will he tell businesses
in the formal sector, which are hard hit as cost of operations
continues to skyrocket?  People are waiting for the present
administration to solve the issue of electricity once and for all
time.

If the move to establish a coal-fired power plant in Enugu works out
fine and other sources of electricity, such as solar and wind are
actually tapped and maximized, the issue of constant cuts in
electricity supplies will be a thing of the past in Nigeria. For now,
it is hard to think that PHCN, with its poor performance since
inception, will be the ‘light’ of Nigeria.


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