Minister of Power, Barth Nnaji

A two-day plain and comprehensible dialogue between government and stakeholders towards leapfrogging the power supply chain in Nigeria was recently convened by the Minister of Power, Prof. Barth Nnaji. It is an annual national power sector retreat where issues bordering on Nigeria’s electricity sector are usually discussed. Chineme Okafor writes on cogent issues raised at the last assemblage

Not even the security challenges currently bedevilling the country, over the nefarious activities of  Boko Haram, could take the shine off the National Power Sector Retreat, which has become an annual ritual in Nigeria’s Electricity Supply Industry (NESI). The event witnessed a massive turnout of local and international audience as well as government and private sector policy makers.

Expectedly, Minister of Power, Prof. Bart Nnaji, took time out to explain pertinent issues bordering on Nigeria’s efforts at reforming her power sector towards leapfrogging into a sustainable power supply regime in line with the economic transformation agenda of the federal government.

Nnaji buttressed government’s bid to transparently reform the country’s power sector from its weak status to a virile state without undue compromise, even in the midst of rigid resistance and extreme funding deficit.

Without mincing words, the power minister reminded the audience of government’s earnest intention to disembark on unnecessary spending spree that yielded no tangible results in the power sector for years now.

Nnaji made it clear to the audience that government would only embark on economically feasible power projects like the slated construction of hydro power stations like the 2000 megawatts Mambilla power station.

But even at that, such projects, he noted, would command some amount of private sector presence, suggesting that successive operations in Nigeria’s emerging power sector would be private sector driven for the swift attainment of goals ensconced in the Electric Power Sector Reforms Act (EPSR 2005).

Top on the issues that were discussed at the retreat, were gas infrastructure and supply, a roundtable discussion with the Transmission Company of Nigeria (TCN) on constraints to power evacuation, renewable energy, Off-grid power supply and energy efficiency, privatisation and regulation, risk guarantee in power purchase agreements as well as strategies for financing the power sector, dominated proceedings, and these issues were evenly thrashed out as concerns on them came from stakeholders.

Strategies for Financing the Power Sector
A roundtable discussion with the Minister of Finance, Dr. Ngozi Okonjo-Iweala, Nnaji, members of the Bankers Committee, Debt Management Office (DMO), the World Bank and FBN Capital on how best to attract the needed financial outlay to push through the development of sustainable power infrastructures in Nigeria. The session was moderated by global management consulting firm, McKinsey & Company.

At the session, Deputy Governor of the Central Bank of Nigeria (CBN), Dr. Chiedu Moghalu, stated that for Nigeria to effectively harness funds for swift development of her infrastructures including power infrastructures, the CBN has recommended that all existing financial development institutions in the country be collapsed into a national development bank.

Moghalu explained that the CBN also proposed that the expected  national development bank should not just come into existence, but must be ring-fenced from all political interference, if it must become effective enough to attract critical funding for infrastructural development in the country.

He emphasised that the proposed one major development bank for the country will be modelled after the Brazilian Development Bank (BNDES), which had remained a critical player in providing funding for infrastructural development in Brazil.

According to him, “While evaluating the various means of funding power infrastructures in the country,  the CBN has made a recommendation to appropriate quarters for the collapse of all financial development institutions in the country into one major development bank, which can swiftly provide funds for development of critical infrastructures in the country.

“The CBN is a shareholder in several financial development institutions in this country and we also prudentially supervise them as development banks. From both stand points, we have the benefit of lessons learnt over many years and we have serious questions about the efficiency and effectiveness of several of these institutions.

“And therefore, we are of the view after a strategy review that, perhaps, it might be better to refocus the financing development landscape in Nigeria by establishing one major development bank of Nigeria, that is well capitalised, free from political interference and is able to give long-term capital for infrastructural development in Nigeria.”

He added further: “This is what we need in this country, we need 15 to 20 year money for development of critical infrastructures. I gave example of the Brazil Development Bank (BNDES); they are a great model for Nigeria. We have made our views known through the appropriate channels when we had our annual bankers committee meeting in December 2011.”

Generally, stakeholders were of the view that if there must be worthy and swift development of critical infrastructure to aid Nigeria in achieving her economic agenda, the country must be able to inspire prudent means of sustainable infrastructural development financing.

Gas Infrastructure and Supply
This session was coordinated by the Group Executive Director, Gas and Power of the Nigerian National Petroleum Corporation (NNPC),  Dr. David Ige.

According to him, a significant amount of gas is stranded currently at the Eastern area supply, mainly due to infrastructure and delays in completion of power projects from the National Independent Power Plants (NIPPs).

He said the expected completion of the Northern Option Pipeline (NOPL), later in 2012 will unlock stranded gas from Mobil Producing Nigeria (MPN), Nigeria Agip Oil Company (NAOC) Ebocha (50mmcf/d) and Total Exploration and Production Nigeria Ltd (TEPNG, 60mmcf/d), bringing them to Obigbo Node hub from where Alaoji and other eastern power plants can be supplied.

Ige added that efforts in gas supply to power are focused on meeting a projected 3.5 billion cubic feet per day (bcf/d) of gas demand by over 30 existing and proposed power plants. His assessment of the status of major gas infrastructure projects however remained positive.

“Nigeria has a huge economic potential trapped in this vast natural gas resource and new sources of gas, hitherto not considered for domestic market e.g.  bringing offshore Production Sharing Contract (PSC) gas to shore, are being evaluated. This could add 400-500 mmscf/d by 2016 and 2017.

To support the agenda, a set of enabling policies were approved by His Excellency, Dr. Goodluck Jonathan.  These are being rolled out and have created a major boost and jumpstart for the sector’s agenda. We have an enabling policy framework which is in place to support critical mass of gas supply development for the power sector and a very good progress is being made in the development of a robust gas grid that will enable rapid growth of supply from diverse sources increasing the liquidity of supply,” Ige stated.

He added: “Medium term outlook is promising and power sector investors can be assured of supply.”

Constraints to Power Evacuation
In his analysis at a roundtable discussion, the Chief Executive Officer (CEO) of TCN, Mr. Akinwunmi Bada, explained that the responsibilities of TCN included the provision of equal access for power evacuation to all participants at all times, ensure full evacuation capability and reliability at minimum technical loss and guarantee equitable load allocation to consumers.

Bada stated in his analysis of the capability of Nigeria’s existing transmission infrastructure that the composition of the country’s national grid consists of; 5,650 kilometres (km) of 330 kV transmission lines, 6,687km of 132kV transmission lines and 62.5km of 66kV transmission lines.

He also added that about 28, 330/132kV substations with a total capacity at 7044 MVA and 119, 132/33/11kV substations with total capacity at 9852 MVA where in existence to guarantee evacuation capability of above 5,000MW on 330kV and 8,000MW on 132kV network.

He enumerated salient challenges to power evacuation, some of which were attributed to the existence of radial grid structure, which is the cheapest and simplest topology for a distribution or transmission grid, single 333KV circuits, concentrated generation as well as stranded generation capacity on the eastern network.

He further said that grid expansion plan was in progress in the TCN Transmission Development Plan that would guide future development of the transmission infrastructure.

The development plan will be implemented in phases- 10,000 megawatts, 15,000MW, and 20,000MW evacuation plans respectively. The plan is however not time-dependent due to the uncertainty of funds to execute the projects.

Bada stipulated that the long-term intention of TCN was to cost effectively provide, operate and maintain the transmission grid network for evacuating and dispatching with minimal technical losses and delivering reliable and quality electricity supply to its clients.

Other issues that equally generated good debates and were greatly discussed by their respective supervisory agents included update on the progress of the Independent Power Projects (IPPs) by the Managing Director of Niger Delta Power Holding Company (NDPH), Mr. James Olotu, renewable energy, Off-Grid power supply and energy efficiency by the Nigerian Electricity Regulatory Commission (NERC) and next steps in regulation, privatisation and capacity building by the Director General (DG) of the Bureau of Public Enterprises, Ms. Bolanle Onagoruwa,  DG of National Power Training Institute (NAPTIN), Mr. Reuben Okeke and representative of the UK Department for International Development (DFID).

The DG of Nigerian Bulk Electricity Trading Plc (NBET), Mr. Rumundaka Wonodi also made a presentation on the guarantee role of NBET in the transitional market where NBET was robustly at the centre of all transactions in the power industry, thus, developing a standardised Power Purchase Agreements (PPAs) in the sector.

Even with the performance ratings on the progress of Nigeria’s power sector by stakeholders indicating poor performance in certain key areas via an instant electronic survey conducted by McKinsey & Company at the retreat, Nnaji disagreed, stating that notable strides have been made so far in the privatisation process, distribution, evolvement of a cost reflective tariff and delivery of gas, amongst others.

He noted: “The fact is some of the progress may just not be as yet apparent to everyone, for generation and transmission, the industry is only slightly behind on minor issues and on distribution the industry overall is on track.

“A lot has happened in the privatisation, we cannot say that everything has been smooth because in a country that is reforming you will have challenges, you will have resistance and that is what we see here.

“We had to work on the development of gas infrastructure, the supply of gas and we constantly had issues with water for the dams but we have made quite a lot of progress, we no longer have blow up of pipelines. We have a bit of stability in terms of piping gas.”

According to him, “In spite of the odds, we have made some progress, and the thing about electricity is that people can feel the progress instantly. If we are not doing well people can feel it. We are not where we want to be.  So what we want to do is to leapfrog.”

He added:  “On financing which has remained quite a challenge to the industry, the minister noted that the industry is indeed behind on major issues as noted by stakeholders. He said that government has so far provided the credit enhancement needed to kick start investments, “this credit structure is very important. It can be slow but it is there.”

Nnaji further explained that the power sector was interlinked with several other sectors, pointing out that the smooth progress of this relationship was central to the delivery of the much needed power.

He however stated that communication between stakeholders has greatly increased, even as he expressed optimism that those set targets in the power roadmap and indeed Nigeria’s power sector would definitely be achieved.