As new regime began in federal ministries after the swearing-in of new ministers on Monday August 21, 2023, attention has shifted to new helmsmen for delivery of services aimed at meeting high expectations of Nigerians. Having endured epileptic power supply for decades, all eyes have now turned to Chief Adebayo Adelabu, who is the new minister of power. The Nation, Southwest Bureau Chief BISI OLADELE examines the challenges before the new power minister and how his knowledge, experience and political will can help him birth a new dawn in Nigeria’s power sector.
The 45 newly sworn-in ministers promised to bring a positive change to Nigeria when they assumed their new roles last week. They all said it will not be business as usual in their pledge to bring the Renewed Hope agenda of President Bola Tinubu to reality. Ranking next to insecurity is epileptic electricity supply in the country. Both challenges affect every Nigerian – rich, poor, urban or rural dwellers, communities, business owners and employees. Nigerians have also endured years of unfulfilled promises in both sectors as things sometimes went from bad to worse. But Adelabu, a finance expert, banker and politician, just promised to turn things round for all categories of Nigerians.
Current power situation in Nigeria
Quoting 2021 data of the United States Agency for International Development (USAID), energypedia.info says power generation in Nigeria is mainly from hydro and gas-fired thermal power plants, with the hydro plant providing approximately 2,062 megawatt (MW) and the gas-fired 11,972MW. Solar, wind and other sources such as diesel and Heavy Fuel Oil (HFO) constitute the remainder with 2,350MW, it posits.
Despite the huge population, which is estimated to be about 200 million, and its classification as the largest economy in sub-Saharan Africa, limitations in the power sector have continued to constrain Nigeria’s growth. The country is endowed with large oil, gas, hydro and solar resources, and it has the potential to generate 12,522 MW of electric power from existing plants. On most days, however, it is only able to distribute around 4,000 MW, which is grossly insufficient for a country of 200 million population.
While also featuring on a radio programme in Ibadan, the Oyo State capital at the weekend, Adelabu corroborated the above data, disclosing that though about 11,000 megawatt of power is being generated, only about 8,000 MW is being successfully transmitted while the distribution companies purchase just half of the quantity transmitted, leaving the other 4,000 MW wasted. Consequently, factories and other businesses, homes and social service providers such as hospitals and schools are left to grapple with power shortages. To shore up power supply, individual businesses, homes and other organisations provide their own power through electric generators, solar and other sources. Experts estimated individual power generation in Southwest Nigeria to be 20,000 MW, costing a whooping N34 billion daily in year 2022.
For manufacturers in the country, most factories are producing far below capacity due to power shortages. Artisans are unable to maximise their potentials due to the same challenge while the service providers such as hotels, recreation centres, supermarkets, restaurants are forced to charge higher prices due to the high cost of providing power.
The Nigerian power sector experiences many broad challenges including the political will to enforce electricity policies, regulatory uncertainty, gas supply shortage, transmission system constraints and distribution inefficiency. Government investments have also been over-concentrated on power generation and transmission with the distribution section of the chain faltering. All these, and others, have kept the sector from reaching commercial viability. In 2O10, the Nigerian Bulk Electricity Trading Plc (NBET) was established as a credible off-taker of electric power from generation companies. By November 2013, the privatisation of all generations was complete. There are currently 23 grid-connected generating plants in operation in the Nigerian Electricity Supply Industry (NESI) with a total installed capacity of 11,165.4 MW and an available capacity of 7,139.6 MW. Most generation is thermal-based, with an installed capacity of 9,044 MW (81% of the total) and an available capacity of 6,079.6 MW (83% of the total). Hydropower from three major plants accounts for 1,938.4 MW of total installed capacity (and an available capacity of 1,060 MW).
In a 2011 presentation, titled “The Demand for Residential Electricity in Nigeria” by Musibau Babatunde and Isa Shuaibu, the scholars said actual electricity supply has been significantly less than load demand, for instance in 2014 and 2016, the actual supply lagged behind the power demand by 21,639MW and 23,401MW respectively, representing about 15 per cent and 17 per cent of power availability. Thus, there is no corresponding increase in electricity generation as population increase as shown in 2014 where country’s population increased to 165 million but the total available power generated stood at 3,795MW.
They posited that Nigeria was one of the most underpowered countries in the world, with actual consumption 80 per cent below expectations based on population and income levels. To plug the gap, they also pointed out that self-generation of electricity in Nigeria was extremely prevalent – a situation they said implied a huge unserved demand. There has not been any significant improvement in power supply from 2011 till date.
While some Nigerians believe that suppliers of electricity generators have constituted themselves into a cartel, frustrating government efforts at improving power supply in the country, The Nation’s research further revealed that government has made a little progress in boosting power generation and transmission though disproportionate to the humongous investments on them, the distribution aspect of the supply chain is currently the rot that makes the entire chain stinks. For instance, the Federal Government has spent billions of dollars in setting up new plants, overhauling existing plants and procuring expensive equipment for generation and transmission, the 2013 privatisation of the distribution arm to private companies was badly undertaken.
The research shows that many of the promoters of the companies that bought the distribution companies were either politicians or people of national influence but whose companies did not have the required financial muscle to invest in the distribution arm. The financial strength presented to the government was loan denominated in dollars. After paying the government for the purchase, they had nothing left to invest in power infrastructures such as transformers, electric poles, lines and metres.
Till date, many of them are struggling to repay the loans which have been worsened by the skyrocketing foreign exchange rate. All they do is to struggle to make loan repayment (some have become insolvent in the face of rising exchange rate), race to offset running cost and concentrate on profit. The goal of bringing in private companies (DISCOS) to run the distribution aspect of the supply chain would have been achieved if the Federal Government had sold to genuine investors who have the funds to invest.
The latest development in the sector is the Electricity Act 2023. The new Act, signed into law by the immediate past president Muhammadu Buhari, moved electricity services from the exclusive to the concurrent list. The Act now allows subnational governments to participate in the entire supply chain. Within one week, however, Adelabu, a finance expert, has demonstrated a grasp of the claws gripping the sector. Showing an understanding that the problem is deep and multifaceted, he has refrained from making a definite promise on the improvement to expect under his leadership. Instead, he has set up a team of experts to review the problems and prospects in the sector to enable him develop a practical approach to solving the problem.
Must-do for Adelabu
For the new minister to succeed, he has to leverage on the Electricity Act 2023 by developing new policies that will support and fast-track the right investments in the power sector. Since supply gap is clearly wide, and the sector proves to be profitable, investors from around the world will be willing to invest in Nigerian power sector. But the policies must be right and attractive. The Federal Government power policies must not hinder investments in the sector.
The minister will also need to establish a robust relationship with the states who now have the power to relicense electricity service providers at the entire supply chain. As it is, states are at liberty to work with existing DISCOS. They may need to re-licence them under new terms. They will also bring in investors in power generation just as they want to explore other sources of power generation such as solar and other renewable energy sources. The minister needs to operate with the states as collaborators, not as competitors in order to maximise the new electricity governance system.
We are expected to see small power stations servicing specific communities. Southwest states are already collaborating on this and results may be seen in the next 18 months if they sustain their zeal and commitment to the project. As generation and distribution increase in the states, they will all count for the overall national output, while employment and wealth creation will be on the increase.
Adelabu will need to work closely with the Ministry of Justice to ensure that the Federal Government does not impede investments in the sector, encourage it to maintain rule of law and also work hard to reduce bureaucratic bottlenecks. Many countries have automated services, but Nigeria is still moving at a snail speed in this. Adelabu will need to work with relevant ministries to ensure that all roadblocks are removed on the way of investments flowing into the sector to boost power supply and create wealth for millions of Nigerians across the 36 states.
As he rightly pointed out in his last interview, the most important thing is for Nigerians to have access to stable supply of electricity in their offices, homes, schools and factories. Any effort geared towards achieving this must be properly supported by the minister regardless of its source anywhere in Nigeria. The minister needs to pay a closer attention to the distribution arm of the supply chain. As it is, that arm may need reacquisition and refinancing as well as proper metering system to make it profitable for investors and boost consumers’ confidence in using and paying for electricity use. There may also be need for national grid concessioning, progressive licensing regime and captive power generation. All these will help in overhauling the aged power infrastructures and bring investments in new types of power sources such as modular power plants.
As pointed out by an energy law expert Prof. Yemi Oke of the University of Lagos, success in the new regime requires that states must also provide enabling environment for investors, offer incentives, allow small investors who can build small power stations to take care specific communities or factories, enact laws that will regulate electricity service chain, introduce proper metering system and obey the laws to boost investors’ confidence, cooperate with the Federal Government and leverage on regional advantage.
Bringing into office years of experience and accolades for performing as a successful banker and finance expert, Adelabu is expected to apply his expertise and experience to facilitate the right investments and add new feathers to his cap of successes as power minister. From his days in commercial banks to his service as deputy governor of Central Bank of Nigeria (CBN), Adelabu has had some experience in power financing. Now that he came to man the power ministry at a time the sector is being transformed, and with immense finance ingredients, Adelabu is expected to demonstrate capacity and competence in bringing smiles to the faces of Nigerians through significant improvement in power supply and cementing the foundation for abundant power supply in the long term.
