PMB’s Power Sector Reform: A Win-Win For Nigeria, Nigerians
By Musa Ilallah
From his first day in office in May 2015, President Muhammadu Buhari had expressed his willingness and desire to improve the fortunes of Nigeria and Nigerians by, among other things, improving electricity supply to every nook and cranny of the country. He was determined, he said, to leave a legacy by the time he leaves office after his first term in office in 2019. It was not just a pledge but a commitment that would stand the test of time.
With a view to realising his vision for 24/7 power supply in the country, President Buhari has inaugurated a Presidential Power Initiative project, PPI for the country.
In very clear and unambiguous terms, the new Presidential Power Initiative is a power infrastructure upgrade and modernization programme agreed to by the Nigerian Government and Siemens AG of Germany, with the support of the German Government.
Under the PPI, the Nigerian Government will, on behalf of the other shareholders in the electricity distribution companies, invest in infrastructure upgrades in the form of improved payment systems, distribution substations, transformers, protection devices, smart meters and transmission lines, among others.
The ultimate goal of the PPI is to modernize and increase the Nigerian electricity grid capacity from about 5 Giga Watts currently, to 25 Giga Watts, over three phases.
The funding for the PPI will be secured under concessionary terms of up to 3 years moratorium and 12 years repayment at concessionary interest rates through the German Euler Hermes cover, which the Nigerian Government will on-lend as a convertible loan to the other shareholders in the Distribution Companies and DISCOS. It also provides support for credit insurers.
President Muhammadu Buhari has approved the release of funding for the first part of Phase 1 of the PPI, to kick off the pre-engineering and concession financing workstreams.
To ensure fairness and transparency of the intervention, the President has further directed that the Nigerian Government engages the International Finance Corporation (IFC) to assist in developing the commercial structure of the intervention under the Presidential Power Initiative, as well as in undertaking an independent company valuation of the DisCos.
It is on record that President Buhari in his attempt to ensure value for money and preserve the integrity & transparency of the procurement process, in line with Government to Government framework, Siemens AG shall be solely responsible for nominating its EPC partners to perform all onshore works, thus cutting off middlemen who are perceived as parasites and ‘strategists’ of corrupt practices by public officers.
The PPI journey started in August , 2018, when Chancellor Angela Merkel of Germany came to Nigeria on a state visit and had fruitful discussions with President Muhammadu Buhari.
Chancellor Mikel’s entourage during the visit included a business delegation that included Mr Joe Kaeser, the Global CEO of Siemens. He pleged to personally oversee the implementation of the Nigeria Electrification roadmap/PPI as a landmark project for Nigeria and Africa.
Total cost of the project which covers some states of the Federation of will be N1.15trillion.
One can vividly recall from media reports that at the meeting, Nigeria and Germany agreed to explore cooperation in a number of areas, including Power.
Just recently, after a laborious, thorough and painstaking process, President Muhammadu Buhari approved the release of funding for the first part of Phase 1 of the PPI to kick-start the pre-engineering and concession financing workstreams.
In line with his vision, transparency and accountability, President Buhari said of the project “Our goal is simply to deliver electricity to Nigerian businesses and homes. Our intention is to ensure that our cooperation is structured under a Government to Government framework. No middlemen will be involved in the deal so that we can achieve value for money for Nigerians.”
The President had also directed that the Nigerian Government engage the International Finance Corporation (IFC) to assist in developing the commercial structure of the intervention under the Presidential Power Initiative as well as in undertaking an independent company valuation of the distribution companies popularly called DisCos.
What can be more transparent than this.
The third force of engaging middlemen to loot public funds has been completely cut off from this power sector negoatiation, financing and execution.
All DisCos have directly, and through the BPE, been diligently carried along over the last 15 months to understand in detail the challenges in the electricity systems.
All items to be purchased were provided by the DisCos and Transmission Company of Nigeria (TCN) and will be vetted by a professional Project Management Office.
According to details of the intervention, funding for the PPI will be secured under concessionary terms of up to 3 years moratorium and 12 years repayment at concessionary interest rates through the German Euler Hermes cover, the Nigerian Government will on-lend as a convertible loan to the other shareholders in the DisCos.
It is expected that the Presidential Power Initiative will, among other things,
deliver improved power supply nationwide, with attendant results in job creation, investor confidence, cost and ease of doing business and economic growth. It will also provide training & capacity building for thousands of young non-graduates, students and university graduates.
Furthermore, PPI will create economic opportunities for Nigerian engineering companies that will serve as local vendors for the provision of manpower and equipment, in addition to stimulating and encouraging inflow of additional investments into the power sector.
Initial development work on the foundational ‘Roadmap’ document known as the Nigeria Electrification
Roadmap was jointly done by Siemens and the Nigerian Government. Signing of the Implementation Agreement for the Roadmap took place in July last year while the Agreement was signed by Siemens and by the Bureau for Public Enterprises, BPE on behalf of the Nigerian Government, and witnessed by shareholders and management of the DisCos.
In line with the PPI schedule, the intervention will be implemented in three phases as resolving 2,000MW of transmission and distribution constraints and increasing the operational capacity of the grid to 7,000MW as phase 1; increasing operational grid capacity by an additional 4,000MW, to 11,000MW as phase 11 and achieving total operational generation and grid capacity of 25,000MW subsequently as phase 111.
Under phases 1 and 11, Siemens will be working to upgrade assets belonging to the Transmission Company of
Nigeria (TCN) and the 11 Power distribution companies, DisCos.
Phase 1 of the PPI comprises several individual brownfield and greenfield transmission and distribution upgrade and expansion projects that will be executed by Siemens and other project partners. These include Transmission projects through supply and installation of transmission substations, transformers and overhead transmission lines; distribution projects through upgrade/expansion of existing substations.
Others are supply and installation of power distribution products and systems, installation and commissioning of mobile substations and power distribution lines; power system simulation and studies of software licences and associated services for TCN and DisCos, including training and technical services for TCN and DisCos; control & protection through supply of control and protection devices for TCN and DisCos; meter data management systems; extensive technical training.
Also listed on the front burner of the PMB administraion towards improving its electrification project of the country is the Mambilla Hydroelectric Power Station, with a capacity for providing 3,050 MW of power into the national grid when fully on stream.
When completed, it will be the largest power-generating installation in the country, and one of the largest hydroelectric power stations in Africa. its construction will cost the Nigerian government $5.8 billion and is located at Kakara Village, Taraba State.
Due to the power challenges in the country, many individuals, households and organizations have resorted to fossil-fuelled generators. Nigerians spend an estimated $14 billion a year on small-scale generators.
Nigeria’s electricity system is saddled with a huge gap between the cost of generating electricity and the tariffs it receives. This gap was estimated at $2.4 billion in 2015-17. The tariff gap, says the IMF, can be closed by reducing the cost of generating and distributing electricity, and through increasing the tariff by at least 50%.
The huge gap between the tariff and operating costs has meant that Nigeria’s privatization of its electricity sector has not delivered improvements in the availability of reliable electricity. This is in part because the electricity distribution companies inherited a derelict infrastructure from the Nigerian government through the National Electric Power Authority (NEPA), which was unbundled in 2005 and privatized in 2013 by the PDP-led federal government.
The strong belief of most Nigerians is that this very strategic move initiated by the President would go a long way in squarely addressing the power challenges facing Nigerians. We are confident that Nigeria will get it right this time around because President Buhari is determined to make the difference.
Musa, a public affairs analyst sent this piece from Abuja, emaij address: firstname.lastname@example.org