A Review of the Nigerian Energy Industry

Privatisation, local content at heart of power sector reform – Nnaji

*Insists on competition in supply of metres

Oscarline Onwuemenyi

16 September, 2011, Sweetcrude, ABUJA – The Minister of Power, Prof. Bart Nnaji has said the Federal government was ready to support the development of local content in the manufacturing of equipment and components for the growth of the power sector.

Nnaji, who was speaking during the 4th Nigeria International Power Expo and Conference, in Abuja, asked for support from the private sector to effectively drive the nation’s power reform, adding that the private sector stood to benefit more in the quest to improve power supply to about 40,000MW in the next ten years.

He pointed out that the private sector and private suppliers of various components needed for the sector to move forward will be the main beneficiaries of the power sector reform.

He said, “Local content is going to be very important in our reform agenda; we want to encourage local manufacturers and support those who are making their equipment locally in Nigeria.

“Right now the country has about 4,000MW of electricity and government’s plan is to have ten times that amount in the next ten years. 40,000MW of electricity in ten years time would mean huge investment; it would require huge equipment input to efforts in generation, transmission, distribution and supply. The importance of the private sector in this nation’s power revolution cannot be over-emphasised,” Nnaji added.

Nnaji noted that to underline the administration’s commitment to improving power supply in the country, the President holds bi-weekly meetings on power with select members of his cabinet to assess developments and issues in the sector.

“We have all come to the agreement that our commitment should not merely be in terms of finance, because the problem of power in Nigeria is mainly that of structure. This is why one of the key programmes to revolutionise the power sector is privatization of major assets in order to get them working to full capacity.

“There is a growing understanding on the part of government that distribution companies must be credit worthy so that they will be able to purchase power from generating companies and pay their bills.

“Generating companies cannot have confidence to generate power unless they see that they can get paid for the power the produce. The same applies to suppliers who supply the fuel or gas for the running of the thermal plants.

“Unless that chain is totally incentivized to perform, meaning if the distribution companies are credit-worthy and are able to pay bills to generating companies who in turn are able to pay their bills to gas suppliers, the system cannot work.”

The minister added, “My job is to ensure that the entire value chain is fully aligned and performing effectively to provide adequate power to Nigerian homes and industries.

He further explained that the privatization effort of the government does not mean completely abandonment of the vital sector, but it would ensure minimal government involvement in the business of producing and distributing electricity in the country.

“It means that the 11 distribution companies would be privatized, the transmission company will be private-sector managed; the hydro stations will be concessioned and the thermal plants will be privatised
The minister further stressed that government was determined to ensure competition in the provision of metres for use in the electricity sector.

According to him, “The issue of metering is very critical for the power sector because it ensures that consumers are pay commensurate prices for the power they consume. We have heard complaints from consumers that when they receive estimated billing, it more often does not reflect the power consumed at the particular period.

“What we would like to see happen is that we provide guidelines as to how the metres should work. I do not think it is in the place of this government to prescribe any specific metre for use by the entire industry.

“It is very important for competition to thrive in the sector, that is what the reform is targeting, therefore it would not be proper or helpful to begin to dictate a monopoly when all we are trying to do is to ensure more private interests come into the nation’s electricity sector.”

Nnaji commended the organizers of the conference noting that through such expos, companies would be able to learn of the latest trends in the sector, and thus be in a position to benefit their businesses as well as promote development of the sector.

Meanwhile, the Chairman of the organizing committee of the Nigeria International Power Expo and Conference, Mr. Ifeanyichukwu Agwu, has commended the Federal Government for “its doggedness in tackling the challenges in the power sector.”

According to him, “While the programmes and policies introduced by it are yielding some positive results, it has become more obvious that this drive can no longer be left alone to government alone.

“This is the time to mobilize stakeholders especially in the private sector to muster the professionalism, expertise and efficiency which is the hallmark of private enterprise to devise a lasting solution to the power situation in the country.”

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