Power Sector Crisis: From Emergency Declaration to Strategic Action Plan & its Implementation

Abubakar Atiku Nuhu-Koko

The Oxford Dictionary defines the word “emergency” as “a serious, unexpected, and potentially dangerous situation requiring immediate action”. Hence, armed with this simple, unambiguous and straight forward definition, I can safely say that any talk about declaration of national emergency on Nigeria’s parlous power sector today by President Umaru Musa Yar’Adua (UMYA) should be reconsidered and an appropriate phrase be used instead.

The new phrase I would suggest is “Strategic Action Plan” for the power sector. This is because Mr. President’s promised state of emergency declaration is now stale if we are to go by the above definition. It has been more than a year since it was first muted by Mr. President.

Therefore, drawing from the above dictionary definition of the word “emergency”, the terminology or phrase “State of emergency declaration” requires immediate action to be taken to address the serious and dangerous situation in the nation’s power sector. That has not happened yet in Nigeria as of today.

And since it is now over one year since the emergency declaration was promised by Mr. President, and it is still yet to be declared, then the usage of the phrase: “Power sector emergency declaration”, is no longer the appropriate public policy phrase to be expected from Mr. President at present (even though the current parlous situation in the power sector is still an emergency one). Thus now the issue of power emergency declaration should be considered from the standpoint of Strategic Action Plan and its implementation.

Actually, President Yar’Adua met the power sector in a state of national emergency already declared silently by his predecessor, former president Olusegun Obasanjo. For instance, the Hon. Ndudi Elumelu’s-led House Committee on Power Sector investigation exposed that former President Obasanjo actually declared a national emergency on the power sector during his second term tenure in office.

This, he did, with the embarking upon: planning and execution of multiple gargantuan power sector capital projects centred on building additional power plants and rehabilitation of existing ones; including transmission and distribution infrastructures and networks, etc.

These power projects and programmes were collectively termed: National Integrated Power Projects (NIPP) and Independent Power Projects (IPP) respectively. We were lately informed that over $10 billion were expended on these projects between 2000 and 2007. Yet, the power sector is still as of today, worse-off than the situation the then Obasanjo’s administration found it at the start of his first tenure in office in May 1999! This is where we should distinguish what have been done already by the former President; Obasanjo, in the power sector from what the current administration of President Yar’Adua intends to do in the sector.

I therefore consider all that were done by the former President Obasanjo’s administration in the power sector as the real emergency declaration. The immediate actions which he took (though after wasting four good years of his first term in office (1999-2003)), to address the power sector problems in his second term tenure in office (2003-2007) easily qualify to be appropriately termed emergency projects and programmes in the real true sense of word and what he actually did.

And, that is where he got his administration in a mess because the emergency programmes and projects were ill-planned. It also becomes the albatross of his legacies. Operating from an unofficially announced emergency situation, his failure to back it up with the necessary legislation and above all, doing away with existing Due Process procedures as provided for by law, all made his now infamous emergency NIPP initiative became enmeshed in all manners of inappropriate decisions, actions and outcomes (for details, we are awaiting the official release of the long-awaited Hon. Ndudi Elumelu’s Power Sector Probe Report as promised by the Rt. Hon Speaker Demije Bankole).

I consider the approach that President UMYA is adopting with regards to solving the problems in the power sector at the moment as “Strategic Action Planning”. This is to correct and at the same time, to avoid making the same mistakes made by his predecessor; who operated what I can safely dub “misguided and illegal” unofficially declared national state of emergency in the nation’s power sector” - but all, with good intentions.

Hence, the so-called “Baba go slow” style and approach of President UMYA should be seen in this light. We are informed by his handlers that the cautious approach of Mr. President (which is life-style) to the power sector reform and revitalization issues is to ensure conformity with his obsession with sticking to the rule of law, transparency and accountability concerning all public policy issues.

I therefore consider President UMYA’s activities in the power sector in the last 18months or so as evolving a Strategic Action Plan for the nation’s power sector. This development actually started unfolding over a year ago when he inaugurated the National Energy Council (NEC), which he chairs. This was announced after the August 29, 2007 Federal Executive Council (FEC) meeting held at the State House, Abuja.

Since then, series of public policy pronouncements, policy reviews and fresh initiatives have been unfolding; within a dynamic power sector policy reform agenda of Mr. President’s Seven-Point economic and political Agenda. Some of these activities are summarized as follows:

The President inaugurated a Power Sector Reform committee on September 7, 2007 to work under the supervision of the National Energy Council that is chaired by the President himself. The Power Sector Reform Committee was headed by the Honorary Adviser on Energy and Strategic Matters to the President, the highly regarded Dr. Rilwanu Lukman; Nigeria’s former Minister of Energy and Petroleum Resources; former OPEC longest served Secretary-General and former Special Adviser on Petroleum and Energy Matters to former President Olusegun Obasanjo (1999-2004) (presently, Chairman, Afren Petroleum PLC - an independent international oil and gas exploration, development and production company).

The Committee was assigned the task of finding urgent and workable solutions to the nation’s power supply problems. For instance, in his speech while inaugurating the power sector reform committee, President Yar’Adua said that while carrying out its assignment, the committee should determine the best ways of deploying Nigeria’s existing capacity for power generation, transmission and distribution.

He said that in drawing up a master plan that will provide for short, medium and long term power requirements of the nation, the committee should also review ongoing power sector projects, including the National Integrated Power Project (NIPP) and Independent Power Production (IPP) projects in the country with a view to streamlining them into the master plan.

The committee’s terms of reference also include reviewing the existing power sector structure in the country to make it more accountable, effective and efficient. The Committee was given six months deadline for the completion of its task. This is an evidence of attempt at methodical long term planning approach.

However, it was only in June 2008 that the Committee submitted its final report to Mr. President, after almost one year of deliberation. The Committee recommended that the Federal Government should halt the privatisation of the power sector until necessary repairs are carried out in the existing infrastructure. In addition, it also recommended that Nigeria needed $85 billion (about N10.2 trillion) to meet her 20,000 megawatts electricity target by 2020. This is clearly at variance with an emergency programming.

The Committee thereby recommended that the sum should be expended on the ailing sector in the next 12 years in order to achieve government's short, medium and long-term target as contained in the Power Sector Master plan. This is another evidence of attempt at methodical long term planning approach by the Yar’Adua administration.

In another twist in the unfolding power sector reform imbroglio, in January 2008, President Yar’Adua surprised all by kick-starting the debate that led to the avalanche of investigations into the immediate past capital spending portfolio of in the power sector.

For instance, speaking while receiving Mrs. Obiageli Ezekwesili (erstwhile cabinet member in the Obasanjo’s administration), World Bank Vice President for Africa at State House Abuja on Monday January 14, the President said over $10 billion had been invested in the sector between 2000 and 2007 without much result, and it would not make sense to pump in more money without a definite and stable project management arrangement. This is yet evidence against emergency preparedness by the administration.

To me, this is the beginning of what I consider Mr. President’s rethinking of the approach in the resuscitation of the power sector. Hence, the beginning of what I regard as strategic thinking and planning by Mr. President regarding the lingering power sector crisis facing the country. In line with this new thinking, for example, President Yar’Adua stated that:

“While we are targeting 6000MW by 2009, the $10bn invested in the sector between 2000 and 2007 has not translated into power generation, transmission and distribution, so we are exercising caution to ensure that any further funds to the sector would translate into production and delivery of energy to the ordinary Nigerian”.

President Yar’Adua further stated that his current strategy is that he will deliberately not put money for power projects in the 2008 Appropriation Bill because he was wary of injecting funds that could end up not achieving the targeted result. Again, this is a wise strategic decision and cannot be equated to state of emergency preparation but medium to long term strategic planning and action.

Furthermore, on Monday January 14, 2008, the federal government opened discussions with General Electric of the United States with a view to entering a partnership towards massive infrastructural development of the country, especially within the power sector. This is in line with the President’s ardent belief in Public Private Partnership (PPP) in the development of the nation’s power and energy sectors

Hence, President Umaru Musa Yar’Adua, leading a team of officials, discussed with Mr. John Rice, Vice President of GE, that the Administration recognised the need to fast-track the development of critical infrastructure in critical sectors such as power and energy, etc. Obviously this development points to a long term strategic planning and action not a state of emergency preparation.

On the power sector for example, President Yar’Adua emphasized that if Nigeria will meet its 20-20-20 target, it had to produce at least 30,000MW of power by 2015 adding that the proposed partnership with the private sector will ensure the attainment of that target. This projection is not to serve an emergency situation but a long term strategic positioning proposition from Mr. President.

For instance, the President also expressed to the GE officials that the country needed expertise from GE to address the National Integrated Power Projects (NIPP) by offering suggestions and solutions to get the plants working. It was in this spirit that the federal government engaged the services of GE to audit the entire NIPP initiative. All these are long term strategic policy options that cannot be equated with an emergency situation.

Another evidence of medium to long term strategic decision was that, President Umaru Musa Yar’Adua on February 19 2008 established a Presidential Committee for the Accelerated Expansion of Nigeria’s Power Infrastructure to give practical effect to his Administration’s pledge to end the country’s long-running energy crisis within the shortest possible time.

President Yar’Adua charged the committee with the responsibility of delivering within 18 months, the 6,000 additional megawatts generation, transmission and distribution capacity targeted under the National Integrated Power Project (NIPP).

The committee’s mandate also included adding extra 11,000 megawatts of power generation capacity by 2011 through diverse sources. Addition, the Committee was expected to:

1. Conduct an independent technical, financial and legal audit of infrastructure in Nigeria’s power sector;

2. Source funding for the completion of ongoing NIPP projects based on terms and conditions mutually-acceptable to the Federal Government and investors;

3. Provide inputs for the design of an appropriate securitization structure to attract credible investors to the power sector; and

4. Provide inputs for a power purchase agreement template that will ensure a reasonable level of return on investment for investors and affordable tariffs for consumers.

The Committee was said to be driven by the private sector leadership and its establishment was based on the conclusion by President Yar’Adua that the government must forge an effective partnership with the private sector to solve Nigeria’s power supply problems.

Members of the committee included Alhaji Aliko Dangote, Chairman of the Dangote Group and Mr. Austine O. Ometoruwa, the embattled Chief Executive Officer of the now controversial Africa Finance Corporation (AFC), a private sector-led development finance institution which is expected to play a central role in the new power sector reform initiative with its significant investment capacity.

The Committee submitted its final report to the President in late in March 2008. And on April 2, 2008, the Federal Executive Council (FEC) approved its recommendations. The recommendations emphasized the role of the private sector in the power sector development. This Committee’s recommendation is at cross purposes with that led by Dr. Rilwanu Lukman mentioned earlier above.

As such, in trying to reconcile the seemingly conflicting recommendations from the two committees, according to Mr. President, it is difficult for the government alone to cough out the huge resources for such investments in the power sector due to other competing interests as well as the funding challenges and limited capacity to design, cost, implement and manage an investment of such magnitude within the envisaged 12 year period.

Therefore, according to the government, it is committed in its pursuit of the Public Private Partnership (PPP), every necessary measure has been put in place to engender appropriate legal and regulatory frameworks to ensure the successful implementation of PPPs.

Although the Committee was tagged “accelerated” expansion, its recommendations will require medium to long term gestation period to yield expected results. Furthermore, in April 2008, the federal government inaugurated Nigeria’s National Gas Master Plan as part of laying a solid foundation for the expansion of gas supply infrastructure within the domestic market; President Umaru Musa Yar’Adua had given approval to the following critical issue areas as follows:

1. Gas Pricing Policy;

2. Domestic Gas Supply Obligation Regulation, and

3. The Nigerian Gas Infrastructure Blueprint

The Gas Infrastructure Blueprint, the first of its kind in Nigeria, was approved by the Federal Executive Council (FEC) during it bi-weekly meeting on Wednesday February 13 2008.

Taken together, the three inter-related approvals constitute the Master-Plan to guide the commercial exploitation and management of Nigeria’s gas sector.
Government explained that the aspiration of the Nigerian Gas Master-Plan is to grow the Nigerian economy with gas by pursuing three key strategies:

1. Stimulate the multiplier effect of gas in the domestic economy;

2. Position Nigeria competitively in high value export markets, and

3. Guarantee the long term energy security for Nigeria.

Furthermore, on Thursday June 19, 2008, the National Economic Council (NEC) gave support and approved financial backing for President Umar Musa Yar’Adua’s plan to declare a state of emergency in the power sector.

The NEC, which is chaired by Vice president Goodluck Jonathan and comprises the 36 States Governors, the Minister of FCT, Governor of Central Bank of Nigeria and Ministers of Finance and Planning also approved the release of a total amount of N628.29 billion ($5.37 billion) to be invested to resuscitate the crumbling power sector from the Excess Crude Oil Account.

However, it was also pointed out that, the N628.29 billion to be invested in the power sector is in form of equity at the ratio of Federal Government contributing 51 per cent while the 36 states would have 49 per cent.

These decisions however, are subject to passing all the necessary legal and due process clearing by the respective legislative arms of the three tiers of governments of the federation – the rightful owners of the funds in the Excess Crude Oil Account.

Also, early in August 2008, the federal government warned that stiff sanctions await any one of the multinational oil companies operating in Nigeria that is not ready to abide by the new vision of the present government’s planned declaration of the state of emergency in the power sector; especially making gas available for the power plants.

Furthermore, as part of the efforts by the federal government to boost power supply, on August 20, 2008, the Federal Executive Council (FEC) consented to the second step in the Gas Master Plan Investor Road show (GMPIR).

Also, the FEC re-awarded various contracts for erection works for three transmission line projects located in the North-East and South-South geo-political zones of the country as follows: construction of two units of 150mva/33kva substation at Yola and one unit of 330kva line bay station at Gombe was awarded to MBH Power Ltd for N1.2 billion.

In the same vein, the construction of 42kilometre 132kva single circuit line and five kilometre approach to Akure 132kv/33kv sub-station (132kv double circuit) was awarded to Dextron Engineering Ltd for N3.5 billion; while the construction of the 2nd Benin - Onitsha 330kv single circuit transmission lines was also awarded Dextron Engineering Ltd. for N3 billion. The projects, to be completed within 15 months, were earlier abandoned due to inadequate funding.

I addition, the contracts for the construction of transformer bay and the refurbishment of a 330kv line bay at Onitsha sub-station and one 33kv line bay at Benin sub-station were awarded to Messr. MHB Power Limited at N467 million with a completion time of 25 months.

Furthermore, the contract for the provision of circuit breakers was also awarded to Pimtek Nig Ltd at a cost of N106 million with a supply period of 18 months.

We can observe that all these actions point to the direction of a shift from emergency declaration to strategic programming.

Only recently, in August 2008, the federal government signed a Memorandum of Understanding (MOU) with Germany on wide ranging power development projects for Nigeria.

The agreement, signed on behalf of Nigeria by the Nigerian Ambassador to Germany, Abdul Rindap, and on behalf of Germany by the German Ambassador to Nigeria, Joachim Schmillien at the State House Abuja, on August 19 2008 is to facilitate the provision of 6,500 megawatts of electricity between now and 2020 by Germany.

According to official sources, this is to be achieved through the execution of various power supply projects, expansion of existing dams, rehabilitation of substations and construction of new power plants in different parts of the country.

The German companies involved in the partnership are the embattled Siemens, ArGe, E.ON, EVONIK and Kfw Ipex Bank. The projects are located in Ikot Abasi (Akwa Ibom), Kainji (Niger), Kaduna, Obudu (Cross River), Kano, Maiduguri, Egbin (Lagos), Sapele (Delta), and Afam (Rivers). Others are in Sokoto, Katsina and Gombe States. This is in addition to a nationwide audit of substations and grid bottlenecks.

Not finished and satisfied yet, President Yar’Adua’s administration on Wednesday, August 27, 2008, as part of its efforts to solve the power problem by generating 6,000 megawatts in 18 months, awarded contracts worth N78 billion ($660 million) to extend the Escravos –Lagos gas pipeline, a major trunk line carrying gas from Shell and Chevron oil fields to power plants across the country. The Ecravos Lagos Gas pipeline is the only source of gas supply to the country’s 1,320 megawatts electricity generating plant at Egbin, in Lagos.

In addition, the new contract is expected to solve the gas supply problem of Papalanto, Omotosho and Geregu power stations. These power stations were part of the Obasanjo’s emergency action programmes that were hastly conceived without making provision for the source of gas supply to feed them.

According to official sources, these power stations have the following respective installed capacities: Omotosho, 350 megawatts but presently generates 75 mw, while Geregu contributes less than 100mw, against an installed capacity of 414mw. Meaning all these three newly built power plants have been operating at far less below their installed capacities due to acute shortage of gas.

Last, but by no means the least, on the same Wednesday, August 27, 2008, the Federal Government, through the Hon. Minister of Finance, Dr. Shamsudeen Usman, while speaking at the 49th Annual Conference of the Nigerian Economic Society (NES), announced that most of the 36 state governments have received the needed endorsements of their respective state houses of assembly to participate in the power sector emergency resuscitation programme and projects.

In other words, they have endorsed the withdrawal of 5.375 billion US dollars from the Excess Crude Oil Account to meet the sectoral challenges. This according to the Hon finance minister means that due process in withdrawing the estimated sum was almost completed. Thus the coast is now clear for disbursement of the funds for the power plants projects etc.

All the aforementioned policies, decisions and actions from President Yar’Adua in the past 18 months or so, point to what I earlier stated above as Strategic rethinking and gradual evolution of a Strategic Action Plan toward resuscitating the nation’s comatose power sector.

These actions cannot be regarded as emergency actions as they require meticulous thinking, calculations and evaluations that require a lot of time lag to arrive at, which cannot be entertained under an emergency scenario.

In other words, President Yar’Adua, is tactically and methodically fashioning and adopting a very deliberate political, economic and strategic intercourse by trying to explore all available alternatives and options, among which are strategic negotiations with governments at all levels, and the private sector partners (both local and foreign) toward the evolution of efficient methodologies of disbursement of funds meant for transparent, accountable and sustainable transformation of Nigeria’s parlous power sector.

Therefore, whatever he is doing at the moment should be considered as implementation phase of his gradually articulated and well designed Strategic Action (or Marshall) Plan for the resuscitation of the parlous power sector.

This is also in line with his concern for adherence to the principles of strategic planning, rule of law and due process in discharging his constitutional duties and responsibilities.

Hence, whatever we are going to see happening will no longer be an emergency intervention as such, but full implementation of a grand Strategic Master Plan for the power sector transformation. This is my view.

Abubakar Atiku Nuhu-Koko

Wednesday, 10 December 2008