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Killing discos? Time for rethink

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By Dele Sobowale

“FG takes over Yola Disco from private investors.” PUNCH, July 24, 2015, p 27.

The story went on to state the reason for the take over. According to the report by Everest Amaefule, “Following the declaration of force majeure by Integrated Energy Distribution and Marketing Company, the core investor in the Yola Electricity Distribution Company, the Federal Government has taken over the beleaguered power firm.”

powerpix-newYEDC is the first but might not be the last DISCO to be taken over by the FG before long. While the decision might appear to be in the public interest, in the short term, it portends grave danger for the Nigerian economy. As more DISCOs go under, privatization of the power sector, a dream since the Structural Adjustment Programme, SAP, was introduced is becoming unraveled.

Unlike the privatization of the banking, airline and communications sectors, which succeeded under Babangida and Obsanjo respectively, the first attempt at privatization of the refineries under Yar’Adua and power sector under Jonathan have created more problems than they have solved. And, there are dangers ahead.

First, reversal of the privatization of refineries, which Obasanjo criticized, and now a power company will inevitably make it more difficult for governments (FG and States) to privatize any business or sector in the future. Capital is a coward; it dreads uncertainties, especially when the capital investment is colossal and the recovery period is several decades.

Taking over enterprises previously managed by public sector appointees invariably amount to re-investing in a business with a great deal of accumulated rot which we were fortunate to discard. Political connections, rather than competence, inform appointments to even the most strategic economic organizations in this country and it is still to be proved that we have changed our orientation in that regard.

Nigeria once had a Governor of the Central Bank of Nigeria, CBN, who read History. He naturally left a “rot” in the system which his more able successors required years to clear. Certainly, none of the investors in DISCOs acquired a unit which required less than ten years to be turned around. Unfortunately, as things stand right now, it is doubtful if any of them will last the next five years. The reasons are not hard to discover.

Without exemption, the DISCOs were the victims of 419 agreements signed with the Jonathan administration. Certainly, among the factors inducing them to invest in the sector were the promises regarding the power generation by 2014 and years beyond. Four highly respected individuals, President Jonathan, Vice President Sambo, and two former Ministers of Power, Professors Barth Nnaji and Nebo promised Nigerians, and by extension the DISCOs, the following:

  • Jonathan in ROAD MAP ON POWER – 14300MW by December 2013.
  • Sambo in 2015, 20,000MW soon (whatever that meant).
  • Nnaji – 5000MW by 2011, 2012
  • Nebo–6000MW by December 2013, 2014, and 10,000MW by December 2015.

If a private entity had promised those with whom it was signing agreements so often and failed to deliver on the promises, it would have been declared fraudulent and the victims would have headed for court. The DISCOs, which must have believed these pronouncements, before parting with their funds, would probably not have bothered if they knew Jonathan and Nebo would leave us in darkness on their way out.

It is bad enough that DISCOs were fraudulently promised power supply, from which they were to make their money, their predicament was deepened when the same government also guaranteed them tariff increase by 2015 which is now almost impossible for them to receive with only five months left in the year. Suddenly, the DISCOs are requested to go and negotiate the new tariffs with their consumers.

That means no tariff increase for 2015. Yet, every DISCO must have factored the tariff increase into their projections for this year. Most Nigerians must have missed the announcement by the DISCOs, in the PUNCH of July 15, 2015, page 34,   by Mr Ernest Orji, of Eko Electricity Distribution Company, EKEDC. According to Orji, “large investment in distribution network was still a mirage as the goal post keeps moving.

It is scary, as many of us cannot meet payment obligations..” In addition to the Federal Government, DISCOs are also behind in their obligations to banks and other creditors and are being pushed steadily to the brink. The collapse of DISCOs, and reversal of privatization of the power sector, at a time when the Federal Government itself is cash-strapped will result in a serious setback to the Nigerian economy immediately.

Nobody can guess when the mess resulting in reversal will be cleaned up and Nigerians can once again be sure of who is in charge of power distribution. When Jonathan, Sambo, Nnaji and Nebo were feeding Nigerians with atrocious lies about power generation, they were warned on these pages, in several articles that the crisis we have on our hands would be one of the consequences of their unpatriotic pronouncements.

In the article POWERFUL LIES; FAMILIAR STORIES ABOUT BLACKOUTS, I made the point that the fixation of Jonathan on re-election is inducing the government to lie to investors in the power sector. It was bound to back-fire. Now the crisis is about to become a calamity.


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