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Opportunities and Challenges in the Electric Power Sector- Prof Barth Nnaji

1. I am grateful to the leadership of this university for the honour of delivering the 7 & 8th graduation of this great institution. I applaud the Vice Chancellor; the Board of Trustees, and the Faculty for the fine job you have been doing in continuing to raise the image of this institute and the quality of education in Nigeria.

2. It is an honour to speak on an occasion like this in an institution of higher learning named for one of the greatest Nigerians ever, His Excellency, Dr. Alex Ekwueme, first Vice President of the Federal Republic of Nigeria who held the office from 1979 to 1983. Dr Ekwueme, GCON, was a man of great learning who received degrees in disciplines as diverse as law, sociology, architecture, town planning, and history; he was at home with mathematics and Latin. He was also enormously cultured and principled. As the panel to probe him headed by Hon. Justice Sampson Uwaifo, then of the Supreme Court, found out, Dr Ekwueme left office with far fewer financial resources and assets than when he joined the government. A successful entrepreneur, Dr Ekwueme was the first person to build a standard hotel in the 1980s in Abakaliki, which was to become the capital of Ebonyi State in 1996. The hotel proved immensely useful, particularly in the early Ebonyi days.

3. Most people don’t seem to know that Dr Ekwueme played a pivotal role in my involvement in developing the Nigerian power sector. When the defunct National
Electric Power Authority (NEPA) wanted to construct a 330KV transmission line from the Shiroro Hydro Plant to Katamkpe in Abuja, it needed an emergency power supply for the two years the construction would last. Dr. Ekwueme went to then-President Olusegun Obasanjo, GCFR, Ph.D, and convinced him to give a team of Nigerian engineers led by me the chance to build a 22Megawatt Emergency Power Plant in Abuja that would guarantee supply of 15MW. The plant was built in record time and commissioned by then-Vice President, His Excellency, Alhaji Atiku Abubakar, GCON 2001. The emergency plant was initially scheduled to run for two years, but it operated for 2 years 4 months. During this period, it supplied electricity to the corporate headquarters of the Nigerian National Petroleum Company, the headquarters of the Central Bank of Nigeria, the Federal Secretariat, the entire Central Business District of Abuja, and State House because of the deteriorating power crisis in Nigeria.

5. The topic you asked me to speak on today, Opportunities and Challenges in the Nigerian Electric Power Sector, is socially relevant. Nigeria currently generates less than 5,00MW for a nation of over 200 million, according to the National Bureau of Statistics. Even so, the transmission network often cannot transport the paltry amount of energy generated due to its fragility.The distribution network is also in a poor state.

6. In contrast, Egypt produces over 59,500 MW, and the level of power keeps on rising. South Africa’s 56,000 MW for its almost 60million people, less than a third of Nigeria’s, has long proved grossly inadequate; it has been experiencing load shedding. For Nigeria to become a middle-income economy, it has to generate and effectively transmit and distribute at least 100,000MW within the foreseeable future. This will mean tremendous employment and business opportunities for millions of people.

7. The Aba Integrated Power Project (Aba IPP) is made up of two NERC licensed companies: Geometric Power Aba Limited (GPAL) which has the 188MW power plant with a 27 kilometer 12inch gage gas pipeline and APLE Electric Limited (popularly known as Aba Power) which is the distribution part of the project. Following the commissioning of the Aba IPP at its headquarters at the Osisioma Industrial Layout in Aba on Monday, 26 February, 2024, by Vice President Kashim Shettima, GCON, on behalf of President Bola Tinubu, GCFR, interest in how the private sector can drive power development in Nigeria has grown appreciably. Nigerians now feel that constant, reliable, quality, and affordable electricity throughout Nigeria is doable, as in Mauritius, Egypt, Botswana, Algeria, and Morocco.

8. I would like to use this opportunity to publicly thank the government and people of this great nation for their solidarity with Geometric Power Limited, the owner of the Aba Integrated Power Project. Very few things in our recent national history have united our people as their support for the Aba Independent Power Project in the days leading to the commissioning and after the event. We truly appreciate the confidence in us and in the Nigerian possibility. The support is comparable to the nationalism and patriotism we see anytime any of the Nigerian national football teams play a foreign team. There is still hope for our dear nation, although the Aba Power Project, originally scheduled for completion within three years, was commissioned a whole 20 years later.

9. There are greater opportunities in the power sector than ever. The 2005 Electric Power Sector Reform (EPSRA) ended the Federal Government monopoly in the sector.

The 2023 Electric Power Amendment Act, which amends the 2005 EPSR Act, enables states to create their own electricity regulatory commissions. Some states have already set up their own commissions. However, here is a word of caution: the electricity business is very expensive and also highly technical. It costs between $1.3m and $1.5m to produce a megawatt from a gas-powered plant, which is the cheapest. This doesn’t include the cost of installing evacuation and distribution infrastructure for the generated power or the cost of O&M and staffing to operate the thermal plant 24 hours a day. The Geometric Power Group spent almost $800m to build the Aba IPP including new substations and powerlines to distribute power to nine of the 17 local government areas (LGAs) in Abia State which we serve, as well as the 27-kilometre natural gas pipeline from Owaza in Ukwa West LGA of Abia State to the Osisioma

 

10. Industrial Layout. This is the largest single investment in the Southeast. How much power does a state need? Some can make do with 100MW or less, but some require anywhere from 150 MW to 1000MW. How many states can afford the huge amount required? If the source of electricity is solar, coal, hydro, or wind, it will be far more expensive. How will the states source the funds? Who are likely to be the off-takers or end-users? Can they pay the commercial rates? Akwa Ibom and Rivers states have built their own power plants, but what is their experience? Obviously, not so flattering. Must state governments that build power plants manage them and the distribution network?

11. Since the Nigerian government has not been effective and efficient in managing businesses in the last few decades, it should concentrate on providing an enabling environment, including making the necessary laws, rules, and regulations as well as policies guiding electricity development.

12. All LGs and state governments in Nigeria plus the Federal Government collectively have a 40% in each of the distribution companies (DisCOs) privatized in 2013. They have not earned dividends from the investments since the privatization. They should divest completely from them. As has been stated many times, electricity is a value chain business. A chain is as strong as the weakest link. Contrary to perceived wisdom, the electricity value chain does not start from power generation but what is called fuel to power, that is, the sources of power like natural gas, hydro, coal, the solar, wind, nuclear, hydrogen, etc. The source must be treated with the seriousness it deserves.

13. I recently called for a state of emergency in the gas sector. I hereby reiterate the call for the emergency. All thermal power plants in the country which account for almost 80% of the country’s electricity are going through a very difficult period because of inadequate gas supply. This is a supreme irony. Nigeria has proven gas reserves of 206.53 trillion cubic feet of gas, with estimated recoverable gas put at 139.4TCF. This makes Nigeria a rich gas province with sprinkles of crude oil since the crude available is only 37.1 billion barrels. If the acute gas shortages are not addressed soon with the required sincerity of purpose by stakeholders, the country will face more severe power shortages.The Public Good, Not Private Agendas

 

14. One thing that has bedeviled the electric power sector is the lack of policy consistency. This lack has awful consequences. President Obasanjo established the NIPP to fast-track electricity development and devoted a fortune to it. However, on coming to power in 2007,

President Umaru Yar’Adua suspended it. By the time President Goodluck Jonathan assumed office in 2010 and brought it back to life subsequently, a lot of things had gone wrong. For instance, work was suspended for years on numerous generation, transmission, and distribution projects. The clearing of electricity goods at the seaports had been abandoned. The payment of contractors had been suspended. The demurrage incurred at the ports was not payable, so I had to work with President Jonathan, the Minister of Finance, and the Customs leadership to find a way out of the conundrum.

 

15. Here is another instance of policy inconsistency, or what Nigerians famously call policy somersault. Immediately I resigned as the Minister of Power on 28 August 2012, rumours began to fly around that I owned Manitoba Hydro Company of Canada. The government consequently announced the cancellation of Manitoba’s contract with the Transmission Company of Nigeria (TCN), though it later reversed itself. A team was nevertheless dispatched to Canada to bring evidence that I owned the firm, only to discover that Manitoba Hydro is a state-owned enterprise that belongs to the government of Manitoba State, known as the Province of Manitoba in Canada. The company was set up in 1961 when I was only five years old!

 

16. Yet another example of policy summersault is the key financing instrument which Dr. Okonjo Iweala and I developed to support power development in Nigeria without costing the Government a fortune. The development of the electric power sector has been stalled for years because of the suspension of Partial Risk Guarantee (PRG) to support power purchase agreements (PPAs). It was this instrument that enabled the emergence of the 461MW Azura-Edo Power Plant in Edo State. With the partial risk guarantee (PRG), a private firm can have the comfort of building a power plant knowing that an institution like the World Bank is providing such instrument to shore-up the payment of the distribution companies. I understand the financial implications to the country if it fails to meet its obligations to the GenCo, however these concerns should be addressed in the terms and conditions of the legal contract/Agreement, rather than halt the progress of the electricity generation sector totally. As things are now, no private sector investor will be attracted to invest in the electricity sector in Nigeria despite the enormous potential the market has if there is no bankable guarantee instrument. The key driver to unlock the power sector for investors is availability of credible and creditworthy off takers. We need innovative solutions that would provide the requisite comfort for potential investors and financiers in Nigeria’s power sector.

 

17. A fourth example of policy inconsistency is that I was able to secure the approval of the Federal Executive Council to build a 765KV national Supergrid. It was meant to radically improve power transmission in the country. But the moment l left, the project was abandoned, as though it were my personal enterprise. The nation thus lost a golden opportunity to address its perennial transmission problem significantly. I am glad that the current Minister of Power, Chief Adebayo Adelabu, is reviving the Supergrid project.

18. Now, the last example of policy somersault. The Presidential Task Force on Power (PTFP) was set up under my chairmanship by President Jonathan who also appointed me his Special Adviser on Power. Made up of a fine team of accomplished and dedicated Nigerians from both the private and public sectors, it operated in an agile manner, free of the bureaucracy and hierarchy of the civil service. It was an immense source of ideas and human resources when I became the Minister of Power in July 2011. The members share the credit of our achievements. Yet, it was scrapped after I left office for reasons I have yet to understand.

 

19. The cause of all this inconsistency was the absence of commitment to the public good. Personal agendas overrode public interest. Phenomena like this come with costs. Organizations that displayed a keen interest in the power reform sector, particularly the privatization of Power Holding Company of Nigeria (PHCN) assets developed cold feet. Jeff Immelt, then-global chairman of General Electric, the most capitalised company in the world then and the world’s biggest electricity manufacturing firm, flew directly from the United States to the Ministry of Power, his first visit to Nigeria, to see how GE could work with Nigeria to develop the power sector. Key government and corporate organizations in the United States, Germany and Brazil signed MoUs with Nigeria to develop the power sector. There were always teams of international media like The New York Times, Financial Times of London, The Economist, etc, in the Ministry of Power. But with the inconsistencies they saw in public policy, they failed to participate in the privatization of the power sector in 2013. All Nigerians are today the casualties.

Conclusion

20. Ladies and Gentlemen, we have a chance to transform Nigeria for good. Our people do not ask for handouts. They like to work for their keep. But they can only work within the confines of the environment they live. These confines are defined by the infrastructure we provide to them. Can you imagine what our ingenious people will do if they suddenly have good roads, healthcare with a good drug industry, a good communication system, reliable, quality electricity, and reliable finance sources? Then the making of the African Tiger can commence. It is in the best interest of each of us to see that we play our role in providing this empowering environment.

 

21. Let us enable our very bright people to unleash their creative instincts so that tomorrow will be magnificent; so that we can join the small train of mighty emerging nations of the world; so that Africa can heroically have something to show for itself as the cradle of civilization. But more importantly, so that we live a higher quality life in our own society with our cultural values intact. So that generations unborn will look at our effort and be proud to have been our descendants: the descendants of visionary people who laid the foundation for leap-frogging our people into productive modernity.

 

22. Before I round up, a word of advice for the graduating students of this great Federal University. One of the key success enablers for a university graduate is your disposition for getting rewarded for your education and experience

 

23. You should understand that the reason why Obama became the President of America is because he sacrificed. After Harvard Law School where he was the first Black person to be editor of the famous Harvard Law Review, he had over 600 highly lucrative job offers. He turned them all down. Instead, he went to Chicago to work as a community organizer, earning perhaps 10 times less than what he would have earned from those jobs. But then, he became the President of America and none of his classmates stood a chance of comparing to him on the world stage. When he was done serving the public, he could have surpassed his classmates in income, if he so chose.

 

24. Finally, when our students graduate from universities, they normally look for jobs. Only very few think of creating employment for themselves and others. Entrepreneurship is a major enabler for economic expansion in the developed and emerging worlds. We have not been quite successful in Nigeria in stimulating young minds to engage themselves in self-motivated initiatives that can lead to the sustainment of their livelihood and potentially others. I believe that high-quality education, especially in any professional endeavor, can lead to entrepreneurship, be it in Accountancy, Medicine, Law, Engineering, the Arts, etc. In the field of technology, we all know the story of Bill Gates, Steve Jobs, the Yahoo Founders: Jerry Yang and David Filo; as well as the Facebook creators, Mark Zuckerberg, Dustin Moskovitz, Eduardo Saverin, and Chris Hughes. All became stupendously wealthy as young students or graduates like yourselves, determined to solve a problem and in so doing, create new ways of doing things in the world. They were courageous. They believed in themselves. I believe that many of you have similar characteristics but may not have come to an understanding that you can do the same. I challenge you to think about this.

 

25. One way to ensure that you are making the right contribution if you are lucky to find a job or to be part of the creation of the company is to always ask yourself; “What value do I bring to this enterprise? How does what I bring impact my organization, my society, and the humanity of people in my country or even Africa?” Do not ask, “How do I maximize my personal benefit from the value I bring to this enterprise?” Resist the temptation to be a hawk in a field full of chicks.

 

26. Like the fountain of spring water from a rock, go out there and be a fountain of great ideas and solutions where your rock is the pillar of integrity. Ask yourself how can I be part of doing something great that significantly and positively impacts my society? How can I balance living well and doing good deeds? How can I stand out among my peers so that those who follow me will say, “I want to be like him.”

 

27. Go out there and be a shining example of what Nigeria and Africa can give to the world. Become part of a movement that will drop Nigeria from the list of the most corrupt nations in the world. Be a game changer. Change your world as many young Africans are already doing. Become the reason why Nigeria will be an industrial economy. Give something of yourself to society without expecting much in return. Refuse to be mediocre. Become an asset rather than a liability.

 

28. Once more, I congratulate the graduating students on finding the fortitude to make it through your courses and emerge victorious.
I congratulate your parents, uncles, brothers, sisters, mentors, etc who supported you through the period you were soaking up knowledge here. Finally, I congratulate the faculty and staff on minting you into a self-directed weapon ready to strike the world market for positive good. Well done!

 

29. Distinguished ladies and gentlemen, let us think of Tomorrow that will be better than today. Let us not be discouraged by the inadequacies of our time. Let us rise to the challenge of experiment and creativity that today’s circumstances demand. I believe that we can do it if we set our minds to it.I thank you for listening

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