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Never Electric Power Always "NEPA": The engineering, political and economic challenges facing the Nigerian Electricity Industry By Ugbana Oyet CEng MIEE
The
current move to privatize the electricity generation, transmission and
distribution industry in A school of thought exists amongst economists that the route to development in African countries is through privatization of state owned assets. However, other economists and engineers (e.g. David Singleton, chairman of Arup Australasia) who have experience working closely with peoples in developing countries recognize that the route to sustainable development for Africans is through local participatory people empowerment projects. One such scheme that is appropriate for the restructure of the Nigerian Electricity industry is one based on the principles of ESOP (Employee Stock Ownership Plan) and CSOP (Customer Stock Ownership Plan). This paper outlines the principles of such a scheme. Nigeria’s Electricity Network Nigeria ’s Electricity network is currently operated as one vertically integrated organization called NEPA (Nigerian Electric Power Authority). NEPA operates the electricity generation, transmission and distribution businesses. Poor performance and long periods of black outs have been the bane of NEPA’s operations earning it the acronym ‘Never Electric Power Always’ amongst Nigerians. It is estimated that about $1240 million (N170 billion) has been lost by businesses due to the epileptic, inadequate and inefficient power supply network since independence in 1960. Due to the unreliability of NEPA, the majority of Nigerian business and domestic residences invest in diesel/petrol powered standby generators. It is also due to the poor performance of NEPA that the Nigerian government has decided to break up the business into smaller firms – six generation, one transmission and eleven distribution companies. NEPA and Poor Performance Dr. Wendy Thompson of the Office of Public Services Reform (UK) who was appointed by the Nigerian government to assist in developing a service delivery initiative reports, “the operational structure of NEPA is perceived to be highly disorganized… in addition to the inconsistency in power supply and electrical currents (which remain priority issues), …the transformers deployed by NEPA were inadequate and outdated..” The
primary causes of poor performance within NEPA can be summarized as
follows: ·
Poor management and organizational
structure ·
Poorly trained and unmotivated staff ·
Corruption, lack of transparency and
accountability ·
Abuse of infrastructure – vandalism
and illegal connections ·
Debt and collection of bill payment ·
Engineering and technology – system
based on outdated technology, aging equipment, lack of monitoring Government Sell Out Solution
In
the aim to achieve rapid improvements in the provision of public
services the Nigerian government has sought to privatize the electricity
industry in its entirety. A handful of foreign corporations have been
jostling to buy one of In
its eagerness to dissociate itself from an under performing utility, the
Nigerian government has all but abandoned its social responsibility and
has ignored the concerns of its citizens, in particular the rural
dwellers. The major concerns of Nigerians are related to the
consequences of privatization namely ·
Electricity price increases ·
Job losses ·
Loss of control over a sector that is
of key importance to the development of ·
Security,
the loss of NEPA to foreign investors will pose a greater security risk
to our nation than the current problems in Plateau state and the
assassinations of politicians ·
Access to the cheapest sources of
energy There
has been little consultation between the government and stakeholders,
and there is no regulatory framework to safe-guard the interests of the
Nigerian people in the privatization process or its aftermath. Investing
for the future Unregulated
privatisation of the electricity industry
along traditional and conventional lines will not address the problems
of NEPA. The recent black outs in
In
The
Ownership Solution In
his book ‘the Ownership Solution’ Jeff Gates outlines how free
enterprise provides a welcome ground and a firm foundation for robust
democracies. However, absent an accompanying ownership participation
element, unbridled free enterprise is destined to throw both the social
and the economic system badly out of balance. The
burden and cost of owning and operating NEPA cannot be borne by the
Nigerian government indefinitely, and privatization is therefore
necessary. However, a holistic approach to privatization is prerequisite
to achieving the outcomes desired by both the government and citizens. A
totally new culture that empowers both the employees and customers of
NEPA, a culture that supports and encourages staff and customer
involvement in improving service standards and performance is needed.
New regulatory frameworks and structures are required to ensure that
privatization is successful and does not result in further
marginalization of the masses. In particular a
regulatory framework which ensures that small and medium sized
enterprises (the back bone of Nigerian enterprise) are able to compete
and participate in the new electricity industry is essential. The
ESOP/CSOP principle is founded on the thesis that people are more
committed to a cause when they have a genuine stake in the system and
can share the rewards of success. ESOP/CSOPs are concerned with
expanding ownership, ESOP/CSOPs often buy stock owned by the founders of
a company and redistribute these stocks to employees and customers. In
the context of privatization of NEPA, the new companies should be
required to set aside an agreed percentage e.g. 30% of the stocks for
stakeholders i.e. employees, customers, federal, state and local
governments. These
stocks can either be bought directly by the stakeholders or held in
trust by the company on behalf of stake holders. The quantity of
ESOP/CSOP stocks that can be bought by each stakeholder will also be
agreed upon by all parties concerned. The federal, state and local
governments may opt to hold a small percentage of stocks/shares in a
silent partner capacity and then sell these shares once performance has
improved and the share price has increased. Tax
incentives should be offered to the companies e.g. where a company
obtains a loan to fund the ESOP/CSOP scheme, a tax deduction should be
allowed for expense of repaying the loan principal plus an employer tax
deduction allowed for dividends paid on ESOP/CSOP held shares. To
encourage banks participation in lending to ESOP/CSOP companies, half
the interest earned on ESOP/CSOP loans should be tax exempt. The
benefits of ESOP/CSOP scheme can be seen in private corporations e.g.
Polaroid, United Airlines, John Lewis Partnership, and Avis; as well as
within countries e.g.
An ESOP/CSOP scheme may not be the easiest and
quickest to implement, however for ·
Boost in staff morale leading to
increased productivity ·
Reduction in levels of abuse and
vandalism of NEPA equipment ·
Improvement in management ·
Increased staff loyalty, dedication and
sacrifice ·
Improved community relations as the
company has greater capacity to anticipate and respond to legitimate
local concerns. The
challenge of privatizing Nigeria’s electricity network offers the
current Nigerian government a unique opportunity to advance in the
social, economic and engineering arenas and empower its citizens. The
principles of ESOP/CSOP provide a model of achieving success and
securing a robust and sustainable future for Nigeria and the surrounding
region. The question that remains to be answered is will the Nigerian
government be up to the challenge?
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