Rumpus over FG’s plan to generate 25,000mw of electricity by 2025


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After struggling to deliver on 5000megawatts of power promised Nigeria in 2015 campaigns, President Muhammadu Buhari has again kicked off his second in office with what his critics described as an ambitious, but hard to attain gambit.

For most commentators, Nigeria’s power roadmap has been slippery and frustrating too, with no one ready to stake out his neck for the political class that has consistently failed on many fronts.

In the latest deal the Buhari administration last week signed a government to government deal with German power giants, Siemens to increase generation capacity to 25,000 mega watts by 2025.

Although details of the new power deal remained sketchy as at the time of this report, indications are that the government might go into further borrowings to finance the project even as it is eyeing oil equipment manufacturers (OEM) for the project.

According to the Debt Management Office (DMO), Nigeria’s debt  had hit about N24.39 trillion as at December 2018, rising by N2.66 trillion in one year. The figure swelled by 12.25 per cent from N21.725 trillion in 2017 to N24.39 trillion in 2018.

While many have welcomed the deal that excludes the Nigerian private given its unimpressive performances in the National Independent Power Projects (NIPP) that gulped billions of dollars in addition  to the privatisation programme of the Goodluck Jonathan administration, Nigerians have however demanded for full disclosure in the deal to avoid a repeat of the past.

This they said would enable the citizens know what it is in it for them and track developments.

Last Monday’s signing of a new 6-year electricity roadmap agreement with Siemens to end by 2025 afforded Buhari, the opportunity to urge Siemens, Transmission Company of Nigeria (TCN) and Nigerian Electricity Regulatory Commission (NERC) to work towards achieving 7,000MW of reliable power supply by 2021 and 11,000MW by 2023-in phases 1 and 2 respectively.

He expects that with the new agreement, Nigeria would attain 25,000MW by 2025 when the contract will end.

The power deal which would be executed in three phases is structured under a Government-to-Government framework intended to eliminate middlemen involvement in an attempt to achieve value for money for Nigerians.

The agreement which also covers spares stipulates that all products to be used in the project execution must be of highest quality German and European standards and competitively priced too.

Beyond the latest deal, Nigerians were alarmed that a similar deal between the Federal Government and General Electric (GE) in 2014, failed to yield the expected result by delivering electricity to homes and  industries just as the 2010 power sector roadmap could not address the challenges plaguing the sector.

The $350 million Nigerian, GE deal was to support the construction of small-scale power projects across Nigeria.

Former Minister of Industry,Trade and Investment, Mr.Olusegun Aganga, had while signing the deal, said the project would fast-track the Federal Government’s ongoing efforts towards providing adequate power supply to industrial zones, as well as Small and Medium Enterprises (SMEs) across the country in line with the Nigerian Industrial Revolution Plan(NIRP).

But, a source close to the deal in the Ministry of Power Works and Housing, who pleaded not to be named said the lack of political will on the part of the current administration foiled the project.

Commenting on the deal, Partner, Bloomfield Law Practice, Mr. Ayodele Oni, said, though the initiative sounds like a laudable idea, especially because the intent appears to be to resolve end to end issues in the sector but the devil is in the detail and implementation, more so in Nigeria’s electric power sector.

A critical question, though, is why other such arrangements like the 2010 power sector roadmap and the General Electric (GE) arrangement of 2009 or so, failed?

‘‘I think a key issue is having the Distribution Companies and other stakeholders collaborate, whilst the government also keeps its own part of the bargain. Everyone should be carried along with risks, rewards and sanctions which are adequately implemented.

Tariffs need to be cost-reflective and metering (with other steps to substantially reduce electricity theft) must be adequately catered to, for us to have true progress.’’

Speaking on the deal, Director of Press, at the Ministry of Power, Mrs. Etore Thomas, submitted that the Federal Government would achieve the 7000 MW target by 2021, assuring that all hands are on deck to ensure the project does not fail.

Similarly, the General Manager, Transmission Company of Nigeria (TCN), Mrs. Ndidi Mbah, explained that, the TCN cannot differ from the position of the Federal Government on the issue.

But, a development economist, Mr. Odilim Enwegbara, described the agreement was a huge joke.

“The whole Siemens thing is another big joke taken too far; just like the last big joke of creating 100 million jobs in 10 years.

Presently, how much electricity do we really generate and how much will be expected from the German giant? Is government in a PPP agreement with Siemens or is Siemens the sole investor? If the little currently generated has evacuation problems what is government doing or Siemens was going to do to upgrade our transmission infrastructure that is currently obsolete?

Shedding more insight into the boardroom deal,  a Director of Eko Electricity Distribution Company, who was also present at the signing ceremony, Mr. George Etomi, said the deal will see the German Government provide services in form of soft loans, saying that is why it is a Government- to- Government deal, with the first phase being improvement of transmission and distribution.

‘‘The reason for this is that transmission is the weakest link in the power sector value chain in Nigeria because of the DisCos inability to wheel out electricity generation beyond 4,000MW.

So part of this support will come to improve the current transmission capacity and later build additional transmission lines to accommodate more power because if both transmission and distribution are strengthened as they are today, the 2,000MW stranded power would be absorbed such that by 2021, we should be able to not only produce but utilise between 6000MW to 7000MW steadily

Then in 2023, they would build new transmission lines that would take existing transmission capacity. You know as it is today, the country has about 11000 to 14000MW generation capacity out of which TCN can only wheel 4000MW. Anytime they attempt to take beyond 4000MW, we record grid collapse.

When that is done, they would have succeeded in aligning distribution, transmission and generation. Beyond 2023, they would now be thinking on how to increase generation capacity from 14,000 to 25,000MW, he explained.

On funding for the project, Etomi said soft loan would be given to Siemens by the German Government while the cost will be passed to the Federal Government who would in turn pass same to the distribution and transmission companies since all monies come from the consumers.

‘‘The idea is that, if you can improve on distribution, more electricity would be available to a larger percentage of Nigerians and you can collect more revenue and subsequently pay back to the Federal Government.”

He said the beauty of the deal is that the soft loan is for a lengthy period of almost 20 years which is in a way access to cheap fund to revamp the electricity sector because today Nigerian banks cannot carry that burden because their lending rates are high and their facilities are short termed.’’

The energy law expert disclosed it was too early to determine the cost of the project as the details were still being worked out, being just an agreement in  principle that has been signed off and agreed upon.

‘‘There will be distribution and transmission equipment that will be negotiated. We the Discos have agreed to have Siemens work with us but we are not going to buy Siemens equipment if the pricing is not competitive and in tandem with current market realties because it is a loan.

So if Siemens is coming with a package that is objectionable, we will go back to government and resist it and maybe through negotiations we can get a better deal.’’

On policy inconsistencies, he said what the private sector players have learnt over time is to take one government at a time because when the privatisation programme of the power sector took off, Government according to him,  gave all assurances that MDAs will pay their debts, including having a cost reflective tariff.

But today, the story is different as the MDAs are now the biggest debtor to the market. I am sure this government means well and we all subscribe to it but it depends on who comes in after 2023 and that is why is the President I believe, domiciled this project in the office of the Chief of Staff in the Presidency and not in the Ministry of Power so that no Minister supervises it.

Also speaking, Managing Director of Financial Derivatives Limited, Mr. Bismark Rewane and Associate Professor of Energy and Electricity Law, University of Lagos, Dr.Yemi Oke, said government should make the details of the deal clearer to Nigerians.

They both contended that Nigerians deserve to know what component of the investment by Siemens would be borne by the citizens and the government.

Rewane said Government to Government transactions with a private sector in the middle raises a lot of questions that needed answers.

On the other hand, he said the solution to Nigeria’s power sector crises was for the private sector to bring on board fresh investments, adding that without a cost reflective tariff no new investment will come on stream.

He said the power sector should not run on emergency situations but on normal business practices that will take into consideration all cost including the cost per mega watt that would be incurred along the value chain, adding that the country must also know the alternative solution that we have so that we can compare to solar, hydro and all other forms of energy sources.

Oke equally corroborated the assertions of Rewane, saying if a cost reflective tariff was not put in place, it would only be in a matter of time before we return to the same level where we have always been in the power sector.  (The Sun)

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