One of the challenges the President-elect, Muhammadu Buhari must confront frontally is the power reform. This newspaper holds strongly to the view that there can not be a genuine effort to jump -start the economy without taclking the power problem.
Part of the difficulty in dealing with issues arising from the power reform may be related to the Power Reform Act itself which guarantees some monopolist status to the successor companies during the transition period, like what happened in the GSM sector.
Most Nigerians supported the government against the obstructionist tactics of the PHCN workers during the process of negotiation for their disengagement because of the raw deal they got from the electricity monopoly and wanted a change. It is a crying shame that the largest economy in Africa cannot generate more than 4000 megawatts of electricity at best making it the largest importer of generating sets in the world with its attendant foreign exchange drain and environmental implications.
Development economists have reckoned that a 50 percent increase in power output will add about two to three percent to the nation’s GDP. Most people thought that reform plus privatization was the best option toward extricating the nation from its enervating power challenge, but it has exacerbated the problem to our collective chagrin. Squarely located, ‘the fault is not in our stars;’ it is in our government. Our leaders got it all wrong from the outset and it is therefore no surprise that we are now stuck in this quagmire. The monster is the Power Reform Act which changed nothing else in the sector except ownership.
The Power Sector Reform Act is fundamentally flawed. It gives the Discos power to collect money from the public whether they supply electricity or not. This is robbery because there is nowhere in the world where people are expected to pay for services not provided by private companies. The Discos are empowered to collect a N750 administrative charge from every consumer and give estimated bill only they can determine regardless of the quantum and quality of power actually delivered. For an elected government to superintend this bare-face exploitation of the people is the height of irresponsibility.
The truth of the matter is that we have failed and must go back to the drawing board because the Act is inadequate and ill-suited to the challenges of the sector. And though the successor firms may demand compensation for changing the rules during the game, we surmise that it is better to ease them off at a cost than to continue the current muddle which is taking us nowhere.
Two fundamental amendments to the Act are imperative. First, provision of functional meters with all costs borne by well-capitalized and economically solvent Discos should be the only basis for billing and collection of revenue which we emphasize must exclusively also be a function of power actually delivered. As things stand now, the Discos are not interested in providing meters for consumers because it benefits them more to work with estimated and crazy bills.
Secondly, the Transmission Company of Nigeria must be promptly privatised to remove government control and ensure improved investment to meet the growth trajectory of the sector. It is a major cog in the wheel of growing the generation capacity of the sector because of its inability to evacuate available power output. It is estimated that this subsector will need about $10 billion to modernise, improve and increase its capacity. Given government’s dwindling revenues and contending needs as well as our traditional experience with the poor management of government-owned businesses, this is about the only way to go.
Another area where fundamental change is required is the ‘national grid’ system, which is an offshoot of our warped federal structure that is wrongly predicated on over centralization. A major defect with such system is inefficiency in management and service delivery, so it has to be broken to zonal or regional grids. There is also a need to allow independent players to participate in the system through some synergy to boost supply. The present practice where they are shut out is monopolistic and detrimental to free market development and improved service.
Evidently, and customary of Nigeria, government apparently did the last thing first by selling the Discos without addressing the transmission question which is frustrating operations. Again the Discos must be compelled to invest in the distribution system by providing transformers to reduce over-loading and frequent power outages when available. We must take decisive action to ensure the system works.
Investors have not shown sufficient interest in the power sector because the framework is still hazy and the issues unresolved. We have got to deal with all the issues and bring on board investors who understand them and have the expertise and finance to grow the sector. We must admit that mistakes were made in the privatization process and begin to redress them. There is nothing wrong in making mistakes but it is criminal to pretend about it.
Terrible mistakes were made in the sale of the Discos and we must proceed firmly to correct them. The present inertia in the power sector is killing the nation and will make transition beyond oil extremely difficult. It is regrettable that government used such sensitive national objective for political patronage. The time to bring home the chickens is now.