FG to Review Power Sector Privatisation

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  •  Discos may cede shares to new investors

Ndubuisi Francis in Abuja

The federal government disclosed Thursday that it is considering a review of the power sector privatisation, commencing with the 11 electricity distribution companies (Discos) in the country.

The Minister of State for Budget and National Planning, Mrs. Zainab Ahmed, unveiled government’s new thinking in Abuja at the question and answer session with journalists, which drew the curtains on the 23rd Nigeria Economic Summit (NES) organised by the Nigeria Economic Summit Group (NESG) in collaboration with the Ministry of Budget and National Planning.

Ahmed stated that the government and other stakeholders had come to the realisation that something critical needed to be done quickly in the power sector.

The review of the power sector privatisation, she stated, would commence with the Discos.

Ahmed said: “The power sector has been privatised but I’m sure every Nigerian can attest to the fact that the privatisation has not worked well, in the sense of what we sought to achieve in terms of power efficiency.

“It has not yet happened. We have now come to the point where government which is a stakeholder in the power sector and other stakeholders must come together and decide and cede some of their holdings to new investors that will inject new funding; investors that have the expertise to grow the power sector that will serve Nigerians.”

She continued: “It’s a process that is on-going, it involves negotiating with the existing owners and also with the government in deciding the right level of holdings that will go up for another round of sale.

“The privatisation has not worked out. We discovered that many of the companies are indebted to the banks, making it difficult for them to make fresh investments in their infrastructure.

“All stakeholders must come together to grow the sector, especially in discussing with the existing owners.”
The minister explained that before any new investment is made in the sector, the contentious issue of tariffs must also be discussed and agreed by all stakeholders in order to attract new investors.

Explaining the government’s thinking to attract fresh investments in the power sector, given the tariff quagmire, she said: “We said the power sector would be opened up to new investors. But it’s very clear that many won’t be convinced with the level of tariff.

“That’s a discussion that has to be held with the new investors. It’s very clear to us that the level of tariffs that we have now is not sustainable but where the tariffs will go will be the subject of negotiations between the government, the existing investors, the new investors and consumers.
“We will try to attain some optimal level that will make an impact on the tariff structure. The starting point will be the Discos.”

On the 2018 budget proposals, the minister said her ministry was ready to meet the October deadline it announced earlier for its submission to the National Assembly.

“The 2018 budget will be presented to the National Assembly in October and we are still on course. The budget is ready, it will be going to the Federal Executive Council (FEC) first of all for approval before Mr. President now conveys it to the National Assembly.

“We are on course to deliver the 2018 budget in October. We hope that working together with the National Assembly, the 2018 budget will be passed on time in December so that in January, we can start with a fresh budget going forward,” the minister said.

On the federal government’s domestic borrowings which is crowding out the private sector, the minister said government had reviewed its loan strategies.
“Government does not go to borrow at 20 per cent. The market actually determines the borrowing, but the point we are making is that because government is borrowing heavily, the financial sector is now concentrating on lending to the government and the private sector gets little or no attention at all.

“Why would the financial sector want to lend when they can buy Treasury Bills at 22 per cent? So we have come to the conclusion that government must reduce its domestic borrowing to free the space so that the financial sector is enabled to borrow to the private sector,” she explained.

On the NES as a platform for the exchange of ideas on the economy between the private and public sectors, she said recommendations arising from the summit would continue to form the nucleus of government’s policies.
“The NES has become a tradition; an institution, if you like, and every year we look forward to it. This is a summit that is undertaken in partnership with the NESG, the Ministry of Budget and National Planning, and indeed the government,” she said.

This year’s summit with the theme: “Opportunities, Productivity & Employment – Actualising the Economic Recovery and Growth Plan,” the minister noted had intense deliberations for three days.

“We had discussions that centred around strengthening skills and competency, access to finance; we also had discussions around the legislation required to unlock opportunities to grow the economy,” she said.
She added that at the end of it, “we have a summit report, a draft of which has been handed over to us today to government”.

“We will begin to work again in partnership with the NESG and its organised committees on how to address all of the various recommendations that have come out of this session,” she explained.

Responding to a question on the chaotic traffic situation in Apapa, Lagos, the minister said the reconstruction of very critical roads in the port city had been approved.

She stated that the level of degeneration of the roads in Apapa had led to recommendations for total reconstruction, noting that the federal government was determined to do so.

On what the government was doing to ensure optimal performance of the ministers, she said a monthly performance chart with set targets had been prepared by her ministry.

She said there would be consequences for failure to meet set targets.
Also speaking at the event, Mr. Nnanna Ude of the National Assembly Business Environment Roundtable (NASSBER) described the consensus reached at NES 2017 as fruitful, calling for quick legislative actions on them.

He said: “There are pending bills and we always try to carry out the economic impact on them. For instance, the Competition Bill has the capacity to create 381,000 jobs annually, generate revenue of N148.3 billion yearly.

“It will also lead to a 10 per cent reduction in the prices of goods. For the National Transportation Commission Bill, it will also boost job creation and government revenue.”

  • Onwumere Nnanyere Henry

    This is a step in the right direction. Power is key in this 21st century and Nigeria developmental process is really slowed by inadequate power. I hope the review will be done with all sincerity to national development and not a way of the present administration cutting their share from the sector.

  • abodes_124

    Classic brainless Nigerian style. Going round in circles. ‘NEPA’ was privatised because it was not working and had not for 50 years plus. Now after a few months you want to ‘review’ the privatisation. Can you please look through the position documents prepared in the run up to privatisation. Only if there is fault in the reasoning should you go to think through a new policy before cancelling agreed contracts at great cost to the treasury only to throw us into the quagmire we were in before.

  • Bakwus

    It will be better to review both GENCO and DISCO at the same time. If care is not taking, reviewing DISCO first would give opportunity to GENCO operators to buy into DISCO and that would be the mother of all scams in nigeria and the consumers would be at the mercy of powerful individuals at every value chain point of energy consumption

    • FrNinja

      Actually imho there needs to be vertical integration to make the sector more viable cost wise. The DISCOs are paying capacity charges aside from just power charges to GENCOs. Were a power company also in distribution then the cost of generating and distributing power would be lower. Similarly the FGN should sell the transmission grid to all stakeholders who should agree on transmission costs and share in it based on usage.

  • Romla

    A review of the Power sector privatization has been long overdue.The unprofessional manner the privatization was effected is partly responsible for the very little progress we are all witnessing.
    I hope, however,that the review will be done thoroughly,professionally,transparently and not just a scam to enable the friends of the current administration to buy in.
    World class partners should be given the opportunity to show us how this very technical,very critical sector is run.It is too critical to be left in the hands of political con artists whose only interest is to grab another piece of the people’s assets to further fill their pockets without any visible performance.

    • The Duke

      “I hope, however,that the review will be done thoroughly,professionally,transparently and not just a scam to enable the friends of the current administration to buy in.”
      I made this recommendation on this platform several times and I am glad that it is now being discussed at the helm of government. However in my recommendations i stated the out of the remaining 41% owned by government, 20 % should be offered for sale on the NSE. As it is now, it looks like they do not want to tow that direction so that those who were not part of the last admiistration when it was done can have a slice of it with the funds they have stolen from the current administration. God help us.

      • abodes_124

        you understand these matters very well. it is a chop chop exercise

    • abodes_124

      No ‘World class partners’ will step in to partner with a government that cancels legally binding contracts on a whim. you will only get Chinese who have their own long term goals.

      • Romla

        You have a point.Note however that the privatization was not not professionally implemented,was politically influenced and has created a number of untidy loose ends.This may ultimately lead to total collapse of the industry.Yes major foreign technical partners may be skeptical by the lack of continuity,but they are presently skeptical and discouraged by the poor overall performance of the fraudulent status quo.Also it is well known that the Chinese like any other developed country have world class firms in the power industry.The Chinese give you the quality you request for.

        • abodes_124

          Yes we and most of Africa will soon have all our eggs in the Chinese basket because they are the ones willing to swim in the cloudy waters of what passes for enterprise. they are taking on lots of loss leaders which truly private companies will not touch. they have a long term strategy which will not be to Africa’s benefit. But hey we Africans think we have picked a breadfruit from the bottom of an oilbean tree.

          • Romla

            A little better than having it only in the European basket as we have done for almost a century.

          • abodes_124

            Its obvious my proverb at the end made absolutely no meaning to you

  • Ify Onabu

    For the energy sector, it is one step forward, two steps backwards. When will the ‘giant of africa’ provide electricity for her people?