DR Lanre Babalola has always been a proponent of reforms in power sector; sometimes he goes it alone. The way the man sees it: no reforms, no industry. It is that fundamental. He believes that the reforms that would increase electricity generation and bring efficiency into the system, is non negotiable.
On a recent visit to Dr Chris Anyanwu, the then director-general of the Bureau of Public Enterprises (BPE), Babalola said that efforts were on to fast-track the reforms of the power sector.
To strategise on the way forward for electric power sector, he noted that reform was critical as it would not “just be about privatization but a means to an end.” To him, the end means the availability of power.
The federal government put the power reform Act in place to enable private companies to participate in electricity generation, transmission, and distribution, which started with the restructuring of the sector and the privatization of the Power Holding Company of Nigeria Plc.
Again, the Nigerian Electricity Regulatory Commission (NERC) had been vested with the responsibility to monitor and regulate the power sector as it undergoes these changes.
It appears, however, that the reform program has been on the table for far too long. The minister said last week that until reforms are undertaken, any progress in the power sector would only be a pipe dream.
Making a case for Reforms
The former minister was bullish on the need for reforms; tying it with the aspirations of the average Nigerian as far as power generation is concerned. He wants it tackled, the enormous financial requirement notwithstanding.
“Unless we undertake reforms, the aspirations of Nigerians in the power sector would remain a dream. That would mean that we need to invest between $3billion and $5billion in the sector on an annual basis. This is according to analysts”.
“Government has never put up to $1billion in the power sector any year apart from the IPP” he told the group of journalists in Lagos. This, he says, would require sourcing the money elsewhere.
“To have power, you need reforms to attract investment in the power sector. I don’t see government putting $5billion in the power sector”.
To encourage private sector funding, he said, the answer, again is reforms. No investor would want to invest into the Power Holding Company of Nigeria (PHCN) the way it presently is.
“Revenue of the PHCN is about N800billion a month. The company suffers in terms of staff shortages in the key technical areas of their operations and huge overstaffing of non-core areas. If you do not clean up this part of the business, you would not get enough revenue”. And you need to do that for private sector investors to come on board.
“The aim of the reforms is to make the power companies run like businesses. The second leg of the reforms ifs to privatize the companies”. Another aspect of the business that needs attention, according to the minister, is the power purchase agreement (PPA).
“Again, the PPA needs to be water-tight. You don’t overpay for what you buy. You have to clean up these areas before you begin to attract $3billion”.
He regretted that the reform process was suspended by some who he claimed was working against the interest of the country. Sadly, the minister was part of that power reform committee where he said he was more or less a lone voice pushing for reform of the sector. “The challenge of the reform was the ill-advised suspension of the reforms. The people that opposed the reforms had vested interest and were not fighting for Nigeria”.
The Challenge of Gas
Babalola used the opportunity to restate the other challenges that presently stifle the availability of power in the country. The major problem is that of inability to get gas to the power plants. This, he said, is tied to the twin problems of militancy and infrastructure.
“What do we need to run the plant? In the short term it is fuel. The gas problem is not a little problem. In terms of actual supply there hasn’t been any increase in the last five years. The problems are the militancy and infrastructure.
“A couple of days ago we got a letter fro Shell saying that we have to short down Oben and Sapele power plants. Shell said they were going to fix Trans-Forcados pipeline. Now they say they have discovered another hole in the pipeline”.
Babalola said efforts are bein made to tackle the problem in the short term. “To compensate for the lack of gas we are looking at LPFO. Again Nigeria has a lot of LPG. We are producing 2 billions of LPG per annum. We plan to convert some of our power plants to make use of LPG. To build up more capability in the medium term we are looking at building up more capability, looking at the use of coal, hydro etc”.
“In the short term we make sure we increase availability”.