Nigeria spends about N400 billion yearly to import diesel to run our homes and industries, but energy experts, some of whom work in the Ministry of Power, say the real crisis in the sector today is the N1.8 trillion loss in the nation’s annual Gross Domestic Product, as a consequence of the current energy policy presided over by Rilwan Lanre Babalola, the energy minister.
“The poorest in our community, currently pay more than N80 per kilowatt burning candles and firewood, while our manufacturers pay in excess of N60 per kilowatt on diesel generation and everyone else pays around N50 per kilowatt on self-generation” an energy expert in the Ministry of Power who spoke confidentially to NEXT in Abuja at the weekend said. Gross Domestic Product represents the total value of goods and services produced in a country over a period of time, typically a year.
Energy economists in and out of government have been speaking in muted but angry tones at the missed opportunities under the leadership of Mr. Babalola, who they worry, defines his priority in the energy sector in a rather simplistic way.
Speaking to the industry journal, Africa Oil+Gas Report, back in April this year, Mr. Babalola who holds a doctorate degree in energy economics from the University of Surrey in the United Kingdom, explained his priority this way: “...from a cycle perspective, first improve your infrastructure, pump money into it, but manage it such that it could at least pay for itself.” Between putting in place an ambitious and strategic energy reform agenda, and engaging in the perennial but tactical option of pumping money into infrastructure to fix assets, the minister seems to have chosen the later.
The result is a huge haemorrhage in financial resources; failed attempts at strategic goals like the bogus promise to give 6000 MW to Nigerians in ten days time; and the frustration of Nigerians who waste about N400 billion yearly to finance substituted energy in the form of diesel fuel.
“They should deregulate this power thing, and allow those who can to actually deliver the thing. Government has proved time and time again that they cannot deliver on this power issue. So, they should just deregulate the sector, period” says Soji Apampa, chief executive of the Centre for Business Integrity [CBI], a civic advocacy body that campaigns for ethics in business, reflecting the moods of business executives who spoke to NEXT in Lagos and Abuja last week, calling for a more sustainable and commercially viable sector.
Energy economists who were at an infrastructure financing meeting organised by the Central bank of Nigeria in Enugu a fortnight ago, and who spoke confidentially to NEXT at Abuja, said “the Nigerian economy loses about $50 billion USD of GDP every year” as a consequence of what one of them characterized as “this abysmal, ongoing, charade wherein each Minister of Power pretends that he or she has to ‘fix the assets first’ before they can talk about reform.”
The real deregulation
What is badly needed at this point, industry experts and advocacy groups said in the course of the week, is a courageous return to the important challenge of designing a sustainable energy reform agenda that puts the question of pricing at the core of a deregulation regime.
Godman Akinlabi of the Daystar Christian Center whose church budgeted N56 million for diesel purchase this year, argues that the reluctance to effective deregulation is informed by a basic sense of injustice in the current policy formulation that he claims “is chasing investors away from the power sector” and this deepens the rationalization for “total deregulation” in the energy sector.
Mr. Akinlabi joins energy economists in insisting that the number one priority in the energy reform platform is a pricing reform that at least frees the nation from a government policy that fools the citizens. However, for a pricing reform to be central to a reform agenda in the country’s energy plan, the minister needs immense political courage, experts say, to confront deeply entrenched interests.
An energy expert at the CBN meeting in Enugu put it in these terms: “the Minister needs the stomach to confront all the powerful interests that are holding back progress at the energy front today and these include his own bosses, and securing the money he knows is owed to pay off pension liabilities, confronting the PHCN establishment, the contract awarders in his own Ministry, giving the NEPA successor companies real autonomy and strengthening the electricity regulator to establish and enforce electricity market rules (especially against PHCN) that compel the market to reform and become private-sector led; and push for security of domestic gas supplies from the IOCs, as well as the trade unions.”
Mr. Babalola did not respond to repeated calls from NEXT to get his perspective for this story but a number of his critics who spoke blamed his leadership in the sector.
“With a Ph.D. in energy economics and having being part of the sector reform process since 2001, this Minister should have known better. He knows that the solution to our power challenge is to re-start and logically conclude the power sector reform process as stipulated in the Electric Power Sector Reform Act, 2005” a banker and energy consultant in Abuja said.
In a report yesterday, we noted that while top government officials have resorted to manipulations, with about N15 billion already invested by the current administration, only about 2900MW is available to Nigerians.
By way of comparison, South Africa has 40,000 MW for a population of 50 million people; Brazil has 100,000 MW for a population of 192 million people; while the United States has 700,000 MW for a population of 308 million people.
In all of these energy markets, a pricing regime that guarantees an effective energy sector is the backbone of these respective economies. In Nigeria, the average unsubsidised tariff at this year’s figure is 7 Naira per kWh. This policy preference, makes the average end-user tariff in Nigeria to be seriously below the prices in energy markets in the developed economies of most European countries and curiously also in most West African countries. The fear has always been whether people pay for a relatively high tariff estimated at N20. Economists and energy experts argue however that the cost that poor people currently pay for the failed energy delivery programme is about four times that value, energy experts told NEXT.
On Tuesday, in the third and final part of our investigative series on power, we examine the power play that has frustrated the sector.
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