A Review of the Nigerian Energy Industry

We’re yet to come up with an acceptable pricing for gas – Ciroma

Joseph Ciroma, GM, TCN

13 April 2014, Abuja – General Manager of the Transmission Company of Nigeria (TCN), Engineer Joseph Ciroma, spoke with Abimbola Akosile on power supply, corruption and other issues on the sidelines of the West African Contract Monitoring Network meeting held recently in Accra, Ghana

How has it been since you became the GM of the Transmission Company of Nigeria and what has been your biggest challenge?

There have been a lot of tremendous reforms and changes since I came on board as the GM of the project management unit. First of all, we tried to find a framework of coming closer to our contractors and also our project consultants to ensure that we have timely delivery of these projects. We look at areas where the contractors have some difficulties either in terms of clearing their goods from the ports, getting their duty exemption waivers and also getting visas for their personnel to come into the country. So we try to form a kind of stakeholder forum where all people are involved, the customs, the immigration and the police and to ensure we have a seamless activity that will lead to timely delivery on these projects.

That was a very big milestone that we actually achieved in setting this forum. We also brought in our supervisory Ministry, the Ministry of Power, the Presidential task force, the Bureau of Public Enterprises, as well as the Ministry of Finance which support us in getting these loans. So we have a very close collaboration with all these teams mentioned to make sure we have a seamless process. A lot of projects have been commissioned across the country, in Lagos, Ibadan and Abuja.

The biggest challenge has been in a bid to try to encourage some of our indigenous contractors to participate in these World Bank projects; we later found out that some of them are not actually used to the World Bank system in accessing these funds. Some of them even have difficulties in getting bank guarantees and also advanced payment guarantees to warrant some of the requirements and securities of the World Bank before payments are made. Some of them even had difficulties in even knowing the process of international trading, on how to fill in the Form M, bring in goods and get them cleared.

Those are some of the challenges we initially had for some of our indigenous contractors. But for any first thing doing we expect some of those teething problems. For now we’ve been able to have a workshop where we invite the banks to come in and try to sensitise and also do some workshop for them to understand how the trading system is done. That was the major challenge.

In some cases too, we have some contractors or bidders coming in as joint ventures and you find that at the end of the day when the contract is won, you actually don’t see the full involvement of these joint ventures in place. It may just be one company that would continue to try to do things in its own way and that too has always been a lesson for us to ensure that for any joint venture companies we make sure that they are fully involved in the execution of projects and also manufacture of goods.

So that has been a major challenge in trying to look at capacity. It’s not really that they cannot get capacity, but because some of the construction companies try to maximise profit so they try to go in for cheap labour, cheap skill and that also has also led to delay in the original completion period of these projects. Some of them spanned more than six months, some of them up to a year, but we are trying to surmount some of those problems and ensure that right from procurement process, right from the evaluation stage we ensure that only reputable contractors are henceforth able to at least win some of the projects.

When the Federal Government handed over the privatised power units to the successful bidders on December 1, 2013, many Nigerians thought Nigeria’s power problems would soon be over. Did you share the same optimism?

Well, people need to understand that Nigeria is out to call on the general populace and especially our partners in the power sector that there are some equipment that take over one year even if you have $1 billion today, you have to go and buy some certain kind of equipment, you cannot just go to the shelf and buy them. You have to design, you have to bring specifications you have to manufacture; you have to do so many things. And you hardly find just one manufacturer producing all the 60 or 70 different parts in the transformer; you have to also rely on some other factory that would give them some of those components. So, people need to understand the process that it takes time for any investment in the power sector, at least give it two to three years before you start thinking of any dividend on the investments that you have done.

A lot of money has been put in the power sector through the National Integrated Power Projects (NIPP), the TCN, through the yearly budgetary funding that also do a lot of projects, the project management unit of the World Bank supervising some projects. So all these things with time, people would actually see where all this money has been put in, so people should be patient. It is very early for us to start assessing the investors who just took over these companies in Dec 1 2013. They are still looking at the logistics problems; they are still trying to understand the networks, because during the process of bidding they never had enough due diligence of what really they want to buy. So, it is now that these things are handed over to them, that they are looking at a lot of work that need to be done, a lot of rehabilitation need to be done, a lot of expansion need to be done. So with time I should say Nigerians should give a little time and the power sector will surely be in place.

But in the project we are doing, whatever we have started, the discos (Distribution companies) and the gencos (Generation companies), that is the investment in the World Bank; we have to continue to the end of those investments before we hand over to them. We are not going to withdraw the investments because the discos have been sold or privatised, no. While they were bidding lots of those projects that we are already doing were already part of the assets of the discos and also the gencos and therefore we have to go ahead with them until completion. Further investment in the World Bank will always be for the TCN which is still under the government purview for funds to be invested. We don’t see the World Bank investing again in the discos and also the gencos in the view of the power reforms around now.

So it has to be sustained by the government?

It has to be sustained by the government, yes, but they would continue of course to invest in the TCN.   

Despite the billions of dollars expenditure on Turn Around Maintenance (TAM) and power infrastructure, Nigeria still generates less than 4,000 Megawatts annually, which is grossly insufficient. In your own words, what is wrong with power supply in this country?

I should leave that…..that is not be a question I should be able to answer. The Minster of Power should be in a better position to answer. But, being a key player in the power sector I want to say that most of the power structure we are talking of e.g. Kainji, Jebba and the rest they have stayed over 40, 45, 48 years of age and most of these machines are something you need to rehabilitate or refurbish. These are all part of the problems, that as one is coming up today in another few months we are also having some teething problems in some of the other machines.

At the same time because of the lifespan they have stayed they are not actually operating at optimal utilisation. For example a unit that is supposed to give 20 MW during commissioning, after these 40-something years of operation, some of them you cannot even get more than 8MW, that is optimal performance has reduced, efficiency has reduced in some of these  plants because of the engines, some things are obsolete and the like.

But the major challenge too is that we have the generation mix where we have about 60 per cent on gas and 40 per cent mix on the hydros. This gas has actually supplemented where we have water shortages in the hydros, but we also have that major challenge of gas. We have vandalism of the pipelines; sometimes too the gas supply might be of very low pressure that we cannot even use at the power station. The quality of the gas is also an issue, so there are a lot of things surrounding the issue of getting that energy that would be required at the power station because of the problem of vandalism of the gas. So the gas challenge is also a major problem on why power supply has been low.

The NIPP under the Niger Delta Power Company has commissioned of recent so many power projects but I tell you today even after the commissioning the gas is not sufficient where they have installed capacity of 3 – 4 units they hardly run more than 1 unit. Gas too is a major problem and the federal government is trying to look at that. The major challenge too is that between the government, Ministry of Power and also the Ministry of Petroleum Resources, Energy NNPC, we are actually yet to come up with an acceptable pricing for gas, compared to what some other international communities or other users of gas are actually paying.

So, determining the correct price of gas is also a major issue because NNPC too is also a commercial outfit that also needs to make money and where they are able to supply gas at $3 or more we are still battling with $1; there is a lot of difference on that and that has also been a major issue. Aside the problem of lack of infrastructure, the little we can get from the NNPC, there is need for us to actually come out with an acceptable pricing of gas so that we can have gas supplied to our power plants. This is what I will say is mostly leading to this low power generation to supplement the natural water that comes in from the hydro power plants.

Recently, the National Electricity Regulatory Commission (NERC) issued a wake-up call to the power generating and distribution companies to step up their acts and deliver on their promises. Is it too early to assess their output?

We are happy that we have a very vibrant regulatory commission in place and that is actually supposed to be their work. Of course while they were submitting their bids, there were milestones that are supposed to be achieved as soon as these power plants or discos are being handed over to them and it is based on these milestones that they have promised Nigerians and promised the Commission that we are now telling them that look you are not doing your work and there is a delay in delivery of what you have promised Nigerians. They have invested a lot of money of course in the purchase of these discos and gencos but at the same time there was a plan telling us what was going to be their monthly, quarterly and annually investment in some of these infrastructure.

We are actually not seeing that going on and this is why the regulator has to come, BPE has to come in, and recently the federal government has set up another monitoring committee to look at the privatisation system. Are we succeeding, are there issues that are still pending why the investors cannot really perform? So I think with all these mechanism that are being put in place by the federal government to check and the regulator also what the BPE is also doing with regards to privatisation of these plants and the discos, I think in a very short while we should expect to see a lot of changes in the approach and behaviour of these investors towards ensuring that they bring in investment and ensure that Nigerians have power supply.

Many Nigerians believe selfish interests and powerful cabals are behind the country’s power woes, and that the degree of importation of generators is inversely proportional to the electricity supply from the national grid. Is there any linkage between the two and any trace of economic sabotage in this process?
Well, on my own perspective and point of view it’s just like when GSM came in NITEL was still in place and was still serving the people before they eventually disappeared. So, if the generators are like competitors to the investors now, it’s just a power holding company which was unilateral but now there are so many of them that are coming in. I mean by the time they start doing well, or by the time what we call embedded generators or independent power producers (IPPs) or whatever you call them come into place, of course the man selling generators would not be told when he should even pack out from there.

So we are still going to see the trend of generators to compete for now because they are at the initial stage. We believe that as soon as these gencos get their footing right, and as soon as we have additional and embedded generation of independent power, definitely people will start comparing cost. What will be cost of buying my diesel, what will be the cost of maintaining my diesel, what would be the overall cost per month or quarterly on how much I’m spending compared to these existing power plants and the IPPs? I know it looks like a threat and an issue but with time when the power sector is put in place, definitely they are going to….

So there would be a situation where generators would disappear?

They would disappear and they have to look for the nearest country to move to. Definitely that trend would reduce.

The power sector has been tagged as a hugely corrupt sector by many analysts. How do you react to this description and what can be done to remove this toga of corruption?

The federal government has done a giant step by these power reforms so it is no longer business as usual and it is no longer government even though there is a little component of government. But the private sector, I mean someone who is in business, would only be after efficiency and productivity. Of course people can say a lot of things on that but I say that for the steps the government has put in place, most of this would have to be reduced because things are now under the hands of the private people and a private man would not want to look at this issue of high corruption or lack of productivity or high cost of running the business. All those things are going to be reduced.

Where do you see Nigeria’s power supply situation in the next 12 months, going by the present efforts and scenario?

In the next one year, we are now at 4,000 MW, I have read in so many media publications that there is a target for us to attain at least 5,000MW by June this year and by December we should be looking at 6,000MW. So that I can say that in the next one year, we are talking about the first quarter, with all these problems we have discussed today the issue of gas supply, the quality, the availability, improved infrastructure, maintenance in the power stations both gas and hydros, I believe the projection of 5,000MW by June and another 1,000 MW in addition to it to make 6000MW in the next one year is realisable, with all hands on in the next one year.

The Minister of Power has analysed how we intend to achieve this. The NIPP is also working hard to commission some of those power plants as well as also some other components of the power projects. The presidential task force on power, the regulator, BPE, all the main stakeholders in the power sector; everybody is working in the areas of expertise to ensure this figure is being met in the next 12 months.

In what capacity are you here in Ghana; to build your capacity on a fact-finding mission, to learn from other countries, or as a member of the Nigeria Society of Engineers?

I am here in Ghana because of the theme of the workshop and the organiser of the workshop. It is a West African Contract Monitoring Network workshop and I am very much interested because as I said my major assignment is project management right from project conception to procurement to evaluation to project management administration up to commissioning and handover to both the gencos and discos.

I am here to learn about what has been the major challenges in project monitoring not only within Nigeria but in the four countries that are sharing experiences today in Ghana, Sierra Leone, Liberia and also see a way of going back to actually put some of these things into practice.

Going back to correcting some of the things that usually happen in the field and also looking at areas like, are we carrying the media along, are we carrying the benefitting communities along, are we actually reaching out to the people to let them know what we are actually doing, and what we have in place? Like I said you can have a project that would start today and the outcome may not come until after two years.

Are we saying that people should wait till after two years before you tell them what you are doing in their communities? You need to carry them along right from the planning stage, you need to let them know where there are problems and where we also have some structural issues like where people don’t understand why some transformers should be put near their houses and why some poles should be planted along their streets.

We need to sensitise them and let them know all these things.
So this has been a very challenging and very exciting workshop that we are able to listen to some of these problems and how to tackle some of those problems. So I am basically here on fact-finding and knowledge acquiring and also developing that knowledge on how I can carry my project team along as soon as I get back to Nigeria.

Do you subscribe to the notion that greater transparency and accountability in the power sector will ensure better service delivery? How can this best be achieved?

Exactly, that is the condition you can see in the two three days we have been here. The emphasis has been on transparency, on accountability on openness and on letting people know what you are doing.

Generally as I said, we need, the people need to know what is happening in the power sector, what the Minister is doing, what all other organs are doing, for them to have confidence that in the next one year, what they are seeing in power supply is going to change.

If people can see that role of openness under the present administration, they can have that confidence in the government of President Goodluck Jonathan that whatever they have started, we need to give this government another chance to get them completed.

Whatever we are doing today, I can see it translating into better services and most of these projects are completed. For example, the community needs to identify with the contractors doing the projects. Once they identify the contractors, the pressure would not be coming only from government would not be coming from the project team, but even the community would also be putting pressure and would also be enthusiastic as to when the project would be completed.
So I think it is a better condition than before and from what we have learnt today, the coalition that is comprising the government, civil society, media house, the private is encouraging that there should be more government participation in all different fields, these would be able to reach out to the people and let them know what has been put in place. I therefore encourage that as soon as this workshop is completed, that the coalition that is already formed in Nigeria is able to reach out by inviting most of these sensitive government parastatals would also be part of it. Even the TCN would be happy to have a formal invitation to be part of this coalition.

Can you put a cost to what Nigeria has to spend to ensure adequate and constant power supply?

The cost is not something you can say for now because people are investing in the office, in generation, the gas power plants, the hydro power plants, transmissions in different sectors, the discos and rehabilitation, so cost for now is something that needs to be analysed, but huge billions of dollars are required.

The TCN two weeks ago had an investors forum in Abuja and from what they presented to the investors that only the transmission sector alone, they need above $1 billion just to address the budgets under transmission alone, and going to generation of course construction of components in generation are even more expensive than what is needed in transmission. So this means going back to what the gencos will need is also going to be in billions of dollars. It is not something you can just cost as I said.

Lastly, what is your message to millions of long-suffering, power-starved Nigerians at this time?

I have earlier said that, as the President is talking, the minister is talking and other stakeholders are talking too, Nigerians need to be patient, Nigerians need to at least give these investors a little opportunity and chance for them to at least put their acts together, for them to be able to look at the investment plan for them to look at their projection in terms of rehabilitation and expansion. At the end of it, Nigerians are going to smile and all we need is for Nigerians to be patient enough. A lot of money has been put into the power sector and definitely this money would translate into better power supply.



– This Day

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