By Okechukwu Onwuka
The Federal Executive Council (FEC) yesterday approved a N45billion ($300 million) credit from the International Development Association (IDA) to finance electricity transmission and distribution infrastructure for the nationâ€™s power sector. The credit is in addition to the $5.38 billion set aside for expenditure under the National Independent Power Project (NIPP) by the Federal Government out of which $3.38 billion has been spent.
The Minister of Information and Communications, Prof. Dora Akunyili, told journalists at the end of the council meeting presided over by President Umaru Yarâ€™Adua that the initial $200million of the credit facility would be devoted to electricity and gas improvement projects. The remaining $100 million would serve as risk guarantee on the project. She said the â€œcredit will be on-lent to Power Holding Company of Nigeria (PHCN) Limited on the same terms and conditions offered by the IDA to the Federal Governmentâ€. She added:
â€œThis facility will also assist in the reform programmes in the power sector; provision of technical assistance and knowledge transfer…Extract from cover story, Govt okays n45 billion loan for power, by The Guardian, Thursday, November 12, 2009.
AS I read this article quoted above, I couldnâ€™t help wondering whenÂ Â Â Â our systems would change for the better. Our government has gone ahead to take on loans for the ostensible purpose of implementing projects thatâ€™ll improve power generation and distribution in Nigeria. On the surface, it would appear that our problem lies in capital to fund the projects and as such, there is a continual effort to seek loans from anywhere for project execution.
Foreign financial institutions who are always on the look-out for vulnerable economies to exploit find African countries and Nigeria in particular very fertile grounds. To be honest, I have no blame for these institutions or countries because every enterprise is established to generate profits and not based on emotions or charity except for NGOs and religious organizations.
The Nigerian businesses who invade South Africa, Ghana and Equatorial Guinea are no different. The guarantee for repayment is usually of primary importance to any financial institution granting a credit facility. For IDA, the Federal Government guarantee for the loan is sufficient as it is backed by revenues from oil production and nothing else. Consequently, it doesnâ€™t matter to IDA how the funds are utilized. If PHCN or the government decides to divert the entire $300m into private pockets, IDA will not be affected in any way.
Itâ€™s not their business as long as Nigeriaâ€™s oil continues to flow. On the other hand, it is the credit facility recipient that has the full responsibility of ensuring effective and efficient utilization of the loans to achieve the desired objective. As I read through the entire report, I could not help wondering who the real project executives are.
Who has direct responsibility for designing and stewarding the administration and utilization of the funds to ensure that the objectives are realized within acceptable timeframe, quality and resource availability? How did we even arrive at the sum of $300m in the first place? Who conducted the technical and financial feasibility analysis; Nigerian consultants or IDA sponsored western consultants?
The article further highlighted that $3.38b out of $5.38b has been spent thus far on the NIPP scheme. This is in excess of 62 per cent of the total budget. At this point, has a project status report been generated? Does the amount and quality of work done to date justify the expenditure of $3.38b (N507billion)?Â The minister saidâ€œThis facility will also assist in the reform programmes in the power sector; provision of technical assistance and knowledge transfer.
The minister is without doubt an accomplished pharmacist and leader with integrity. Iâ€™m not too sure though that she is that deep with respect to practical challenges to effective project management in Nigeria. Particularly as it relates to foreign technical partnerships and technology transfer.
For posterity purposes, let me state this clearly; there is nothing like technology or knowledge transfer. No country in the world will readily transfer knowledge or technology unless it is obsolete. Countries develop their own technology by aggressively pursuing knowledge acquisition, testing and sacrifice. It never comes through grants. If you look through the terms of these loan agreements, youâ€™ll find that technical services and so-called knowledge transfer scope (usually given to US or European consultants) will constitute a significant proportion of the credit facility. Malaysia, Singapore, Iran, South Korea and other formerly third world countries developed by building on a pivotal value system that is as detailed in planning as it is in execution.
The IDA loan has a 40 yearÂ Â Â Â repayment period plus 10-Â Â Â year grace period. For the Nigerian project executives, how is the project structured to pay back the loan without falling back on the federal revenue of oil? Is the project management plan together with the project risk management plan robust enough to have identified the historical causes of project failures at the capital construction stage and the eventual operations? Have we identified the weakness in human capacity availability, utilization and efficiency thus proactively identifying effective controls to manage them?
Are the scope definitions clear? Are all main interfaces and tie-in points identified along with associated risks? Do the project executives have the relevant experience to drive the implementation to success or are they selected based on tribe, party or state of origin? Has the well known fact that poor maintenance culture accounts for the failure of many Nigerian projects from refineries to power plants been factored into the overall project management plan? Neglecting this critical aspect will show clearly that the payback was never going to come from the project itself but from the usual source: Oil revenue. This would be a big shame.