Vanguard News Nigeria

The problem with power?

Minister of Power, Works and Housing, Mr Babatunde Fashola

By Donu Kogbara

POWER outages are the bane of our lives in Nigeria. The average citizen suffers countless hours of darkness. Food rots as fridges are rendered useless. Entire urban and rural areas routinely go through days on end without any power at all.

Even those who can afford generators that guarantee nonstop electrical coverage have to tolerate the ear-splitting noise and noxious pollution they generate. And let’s not forget the vast sums that are spent on diesel. Alhaji Abdullahi Gachi, an engineer friend of mine, sent me his views about the status quo; and I thought I should share them with Vanguard readers:

‘I’M always struck by how much money Nigeria has invested in the power sector without anything really changing. The government always promises there will be light, but we are still being left in the dark. Now we hear there is palaver. Firstly, the private sector generating companies, Gencos, are complaining that their invoices are not being paid by the Nigeria Bulk Electricity Trading Company, NBET, on time or at all.

Secondly, the solar power plants already agreed with NBET with the potential to be operational in the North next year being built are stalled as NBET seems to be trying to get out of an agreement and tariff it has made. So what is going on, I wonder?

The long and the short of it: The government is not paying its bills. NBET has been paying as little as 20 per cent of the Gencos’ invoices. So it’s buying a sachet of pure water for 10 naira, drinking it and then offering the seller two Naira. But, hang on, didn’t the pure water sellers have to borrow money to buy the pure water to sell? Meaning, the Gencos are not able to service their debts with the banks, pushing them deeper and deeper into debt. And potentially taking the banks down with them because loans are not being paid.

So when a brand new power plant called Azura started generating power in December 2017 and was paid 100 per cent of its invoice, the older Gencos snapped and took the Federal Government to court. “Why are you paying him 10 Naira and me only two Naira?” We now have an ugly situation where the older Gencos are not getting paid in full, but the new kid on the block is getting paid in full. And NBET has even gone one step further: It is stopping the solar power plants from being built in order not to have to pay them in full, too.

Why the difference in treatment? Well, the problem is that Azura has a Put Call Option Agreement, PCOA, signed with  government and a World Bank Partial Risk Guarantee, PRG. The World Bank’s PRG means that if NBET does not pay Azura’s invoice, Azura just knocks on the World Bank’s door and collects. Azura is currently the only generating company with such a guarantee. And NBET is doing its best to prevent the solar power plants getting the same. The older Gencos do not have such an instrument, and are rightly miffed.

NBET could manage all of this a lot better. Simply pay all the invoices and then the guarantee becomes unnecessary. The money is there.

After all, the Federal Government has approved over N700 billion to make sure these companies are paid. Does NBET not realise that the consequences of not paying Azura’s invoice could affect the price of rice and garri? If NBET does not pay, and Azura calls on the guarantee, NBET either has to repay the guarantor or the Federal Government has to indemnify the World Bank for having picked up the tab.

Any failure by government to do so would be a sovereign default. And as the Minister of Finance’s Special Adviser, Media recently said: “A sovereign default has the consequent effect of increasing Nigeria’s credit risk and cost of borrowing in the International Capital Markets, ICMs”. Meaning that if we don’t pay our debts, we can’t borrow money.

In fact, the lenders who have lent us money will want their money back before we can even pay. We will go broke. And there will be no prospect of borrowing money anywhere, let alone attract foreign investors – such as those who are willing to put $2 billion into the solar power plants. We can then simply rename Nigeria, Argentina. After all, some of Argentina’s creditors are in court trying to seize the country’s assets, such as money held in Western banks.

If that were not enough, there is even trouble inside NBET. Some sections of senior staff are locked in a bitter feud with management so toxic that staff are apparently secretly recording what other staff members are doing. So sayeth none other than the Permanent Secretary to the Ministry of Power, Louis Edozien, who cautioned the Managing Director of NBET, Dr. Marilyn Amobi, in a memo published this week.

Interestingly, the Permanent Secretary may have unintentionally contributed to setting all this upset in motion with the appointment of Dr. Amobi in the absence of an NBET Board of Directors. Unlike many other Federal Government agencies, NBET currently has no such board, meaning no one is keeping an eye on what management does. Let alone protect NBET management (who technically come under the Ministry of Finance not the Ministry of Power), from political interference.

Political interference

It was, therefore, hardly surprising that the Minister of Finance was quick to deny that she was responsible for preventing the 14 solar power plants, which are predominantly destined to bring light and jobs to Northern Nigeria, from going ahead. The time would seem to be ripe for government to consider appointing such an NBET board to rekindle confidence in the power sector.

As I said, the long and the short of it is, despite all the money going into the power sector, this situation is taking a turn for the worse and looks set to spill over into the banking sector.

I hope not as I, for one, don’t want to always face permanently empty ATMs. If only because government is failing to pay those critical stakeholders making and bringing power. Let us all hope that the wise men and women in power provide us with power – to lift us out of poverty rather than pushing us over the edge.

Fix NBET and payments and you take a step to fixing the problems in the sector. To paraphrase an old saying: “A switch in time will save nine.”

 

Responses to: donzol2002@yahoo.co.uk or to 0802 747 6458 OR 0811 675 9752 (texts only). PLEASE KINDLY NOTE THAT UNLESS YOU REQUEST ANONYMITY, YOUR COMMENTS MAY BE PUBLISHED, WITH YOUR NAMES AND CONTACT DETAILS ATTACHED. 

Latest News

Top Stories

Trending