By UDEME CLEMENT

The lingering power crisis that has taken it toll on various sectors of the economy, especially manufacturing, sends negative signal for the economic transformation agenda of the Jonathan administration.

With the massive drop in electricity generation from 3,513 megawatts to 2,513, meeting the target of 10,000mega watts of electricity generation by December 2014, as projected by the Federal Government, is under probability.

Even more worrisome is the fact the massive drop in power is coming at a period government is investing heavily in the sector. With the latest development, privatisation of the Power Holding Company of Nigeria (PHCN), carried out to find a lasting solution to the problem confronting the sector, seems defeated.

In the last two months, government has approved N5.2billion for the sector. N3.9billion was approved for power transmission infrastructure and N1.3 billion for manpower development and training of 3,700 youths, under the National Power Sector Apprenticeship Scheme (NAPSAS).

Notwithstanding, government efforts and monetary allocation seem not to be yielding positive results as the level of electricity generation in the country continues to dwindle. While some experts are calling for more private participation in the sector, others said many contractors handling power projects are not transparent.

When Sunday Vanguard visited some electricity distribution companies in Lagos, the officials were seen carrying out their normal duty. A senior manager, who spoke under anonymity with our correspondent at the electricity distribution unit in Magodo area of Lagos, said, “The major constraint is shortage in gas supply. This is not the first time we are experiencing a huge drop in electricity generation. Similar thing happened in the last quarter of 2013, when power generation in the country dropped by 954MW, approximately 1,000. For instance, in 2012 economic year, we generated about 4,517MW but in 2013, the generation capacity stood at about 3,563, showing a difference of almost 1,000MW, which is exactly what we are experiencing currently.

“Even the issue of gas shortage everyone is talking about did not start today. Before the administration of President Goodluck Jonathan, the previous government commissioned so many power plants across the country without gas to power those plants.

You can see the challenge. Realistically speaking, the power crisis is not something we can tackle within a short period, as many people are looking at. What most Nigerians do not understand is that investment in this sector requires a long gestation period before positive outputs can be recorded. It is not like buying and selling where you begin to make profit immediately.

“Aside from investment in the sector, government should provide adequate security for gas pipelines and other public goods across the country. For example, Lagos axis is often powered by gas supply from Escravos. So, the moment there is vandalisation of Escravos Lagos, which is the gas pipeline supplying the western zone, there is bound to be problem with the supply chain”.

On whether the private companies that took over the assets of PHCN actually have modern equipment and technical-know-how to generate sufficient electricity for domestic and industrial consumption, he explained, “The issue goes beyond equipment. We face the challenges of water shortage in the dams, vandalisation of electricity equipment as well as insufficient transmission infrastructure. We must also look at the operating environment and the issue of security.

For instance, about 72 generation licenses were given to different companies to generate power, and 57 out of 72 were to provide on-grid power while 15 ought to operate off- grid. All things being equal, the 57 licensed firms ought to generate at least 26,093MW, but this is not happening now because the gap between demand and supply in the country is still very wide”.

Electricity generation capacity:

The statistical analysis of electricity generation capacity in Nigeria in the last four years shows that the sector has not recorded any remarkable improvement.

2011 –  4,321MW

2012-   4,517MW

2013- 3,563MW

2014- From 3,513 to 2,513 in the last quarter

The views of manufacturers/industry players:

Massive drop in electricity generation can trigger inflation—Mr. Ikpong Umoh, Chairman, Toiletries and Cosmetics (T&C) group of the Manufacturers Association of Nigeria (MAN). Umoh, while speaking to Sunday Vanguard, said: “The drop of 1,000mw in electricity generation if not properly handled is capable of causing inflation in the economy.

The reason is that manufacturers are going to spend more money in buying diesel to power their generators. Some may have to purchase new generators to continue their production. This implies that manufacturing firms are going to incur more expenses, which will automatically increase their over-head cost of production.

At the end, the extra cost will be transferred to the prices of goods and services, because the manufacturers must improve their margin in order to stay afloat in business.

”Also, some distributors who usually buy from manufacturers may be compelled to cut down on the quantity of goods they ought to buy. Industrial revolution will not be successful without constant power supply and infrastructure development.

The situation we are experiencing now is very sad. Up till now we do not have electricity for industries to grow despite the privatisation exercise. The current electricity generation capacity in Nigeria with a population of over 160million stands at 2,513 while South Africa with a population of over 40million generates about 36.000 MW of electricity.”

On the recent pronouncement by government to stop importation of petroleum products by 2018, he said, “Nigeria can actually stop importation of fuel before 2018. For us to achieve this target, government must have to political will to remove all bottlenecks. Private companies should be encouraged to build refineries across the country.

There is what is called modular equipment, which government can acquire to ensure that we refine the crude oil in the country. Modular is modern refining equipment that can be fixed to work instantly.

There are serious funding issues with the sector – Mr. Mudashiru Yusuf, an economist and Director General, Lagos Chamber of Commerce and Industry (LCCI).

Yusuf said, “The issue is that the investors had apparently underestimated the challenges of fixing this important sector of the economy. Also, the sector has a peculiarity of a long chain in the delivery of desired outcome. Untill each component of this chain is properly fixed, we may not have the expected service. The system is therefore as strong as the weakest link in the chain.

“The critical components of the chain are generating companies, which have been hampered by the problem of lack of gas availability, the transmission companies, which are being constrained by weak infrastructure, the distribution companies that are crippling with the problem of obsolete equipment, billing problems and power theft.  There are also serious funding issues across the entire value chain of the power sector in Nigeria.”