A Review of the Nigerian Energy Industry

PHCN new owners should recall workers – Nebo

Professor Chinedu Nebo02 January 2014, Abuja – Minister of Power, Prof. Chinedu Nebo, in this interview, said there are many challenges in the post privatisation era in the power sector but they are surmountable. Excerpts:

What were the initial challenges after handover of PHCN assets to the new owners?

The private sector is just bracing up to the challenges and the challenges are a myriad because the entire market is not totally solvent. The reasons are obvious, we have an incredible metering gap that was not fully addressed before the takeover. But we are trying to find ways to mitigate the consequences of these huge metering gaps that was estimated to be up to 2.7 million. It’s not easy to fill that gap within a short time, it is something that will take time to procure and install and commission the meters. So collection of tariff has not been easy, that’s one of the serious teething problems. People who are not using pre-paid smart meters are being given estimated bill.

Why did you disengage all the PHCN workers even though you need their services again?

Unfortunately, another mistake was that the Distribution company (Disco) owners sacked many of the workers and some of these sacked workers were people who were very good at collecting the tariff. The new owners worked with the Bureau of Public Enterprise (BPE), 100 percent of the workers were sacked but it is at the instance of the new owners to retain who they want to because they are no longer under the government employ; I think they should recall this people back because some of them are good and know how to get the money. It is better to incur some losses to get more than 80 percent of revenue from the sector.

You know it’s a chain, if you don’t collect this money how does the Transmission Company of Nigeria (TCN) service its facilities, how do the generating companies get paid. What happens at the distribution end definitely affects the generation end because they need money to pay for the gas and the gas doesn’t come cheap, if they shut the gas it will affect the entire system.

What are the other challenges in post privatisation?

The companies did not quite fully understand the market because we handed over completely without declaring the Transition Electricity Market (TEM). But the reason we could not declare TEM is because there are conditions precedents. But we needed to hand over because these people have paid and they wanted to take over the assets.

We have almost completely addressed the issue of labour settlement apart from Enugu where there was another biometric capturing and that is been addressed. About 1,000 workers still need to be taken care of and that is been done. NERC engaged all the participants, both at the generation, distribution and transmission value chain, to ensure that there is an agreement that basic interim rules were put in place – rules that had the approval and buy-in of all the market participants, and would be holding forth until the declaration of TEM.

What about gas supply constraints?

The major drawback we have now is the issue of lack of adequate quantities of gas needed for proper generation. If you buy a company and you are supposed to, like Egbin, generate 1,100mw and you end up generating 600mw it’s a huge loss to the company. Part of the reason is vandalism and all kinds of unpatriotic activities. Those in the eastern zone we have oil theft, we have the most proficient oil thieves in Nigeria. They are always steps ahead of law enforcement because when they go to steal the oil and because of the nature of the transport of gas, the only way to stop disaster is to shut off gas.

On the western axis, it’s pure vandalism and sabotage, all the blow holes in that axis, Warri, Excravos, Lagos axis and so on, were sabotaged because they were dynamite blown, done in such a professional manner. This takes a lot to repair them, as you finish a part and begin to test you find out that you can never build enough pressure, from about three to six blow holes we ended up finding out there were more than 12 blow holes and they have finished the job already. For six months we are losing delivery capacity that is costing us over 1,000mw including the repairs and expansion work that will give us additional 200mw but we hope that in the next few weeks we will have that sorted out.

Is there any intervention from government on gas-to-power?

If you were a gas supplier, you will first consider supplying gas to the person who pays you better than the person who pays you lesser and still owes you. That has been the situation all along, the power plants were getting gas at very cheap rates because they were owned by government. But now we have private people; since January we have paid every bill for gas, and not only that, the tariff for gas is rising from $1.80 and will go up to $2 very soon and it will continue to appreciate. We looked at all the vandalism with the supply of gas and saw that the supplies to the industries remain consistent but the one to power drops and if you are technically minded, you will know it is vandalism plus smart sense, but we are working hard to make sure that we get it right.

What are the ministry’s diversification plans in post privatisation?

We targeted the rural areas that are far-flung from the national grid, we think that it is not going to be feasible to use gas fired plants and doing all kinds of radial connections to them, so we decided to go renewable, and the source of fuel will be supplied by nature and that is solar and wind. Right now, because of the technicalities involved in wind turbines, many of them in order to be functional would have a minimum wind velocity of 5mps, some very fine-tuned technology will even take 3.5mps, but most of Nigeria is between 2 to 5mps at 10 metres. In order to really get to 5mps apart from the coastal areas that are much higher, you now have to go up to 100 metres above and that is why we are emphasising solar and, so far, it has been remarkable.

It has been fantastic, giving them 100 percent, 24 hours power supply not only in their village squares but also in every homes, we have done that at Durumi where night activities, pharmacies and health centres now work well because they don’t have to worry about the sustainability of their drugs because they are cooled now.

In these villages, we created a commercial hub to boost their commercial activities. Now every household in Durumi and Shape which are the pilot projects have these facilities; there is no village in Nigeria that has the quality of power from integrated solar like what is available in Durumi. We are also trying to devise a payment system that is digital and easy in these villages; it has to be ‘pay- as- you- go’ to sustain it. They are buying kerosene, fuel and other fuel sources to power their small power plants but don’t want to pay for something that is better off by far. They can pay but we have to teach them how to pay with better advocacy.

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