The power challenge

POVERTY was the scourge of all of us. Its consequences; insecurity, instability, low education and the viscous cycle inherent therein; as we count human beings, statistic, but not human capital. Productivity therefore continues to be poor and quality of life rather atrocious.

One of the examples of crippling poverty, persisting, is the Almajiri time bomb in Kano. Every night in Kano several million young people who roam the streets begging go to sleep with hardly any food in their bellies. They sleep on the streets and have no schooling, ensuring they would be unemployed and locked into the poverty trap. When they go from being 11 years old to being 31 years old, they will not opt to sleep hungry; they will make sure the rest of us do not sleep also. Part of the reason they may never find jobs is that the Bompai area, once a thriving industrial estate is today a graveyard of antiquated machines.

The main reason this collapse of Kano's industrial strength is power failure. Power is so central to modern life, its economy, its pleasures and its social organization efficiencies that is unfathomable that the leadership in Nigeria in the last 15 years has not been able to reverse the downward spiral of the sector in spite of the availability of enormous cash flow from high crude oil prices. With each World Bank Group Private Sector Assessment report (PSA), and Doing Business Report (one was launched just last week) indicating Nigeria is one of the worst places to do business in the world and that the power situation is a big part of the problem you would imagine the leadership would approach the problem with great determination and sense of mission. Instead, the more we get promises that power failure will soon be ancient history the worse things become.

In my view, the problems of power are the problems of strategy, commitment, corruption, human capital and faulty project management. At the level of strategy it seems clearly that the emphasis on a centralized system focused on a National grid has been at the heart of the failure to make progress. This obsession seems to flow from the general departures from the principles of subsidiarity and federalism which were the pillars on which the founding fathers created the hope of the emergent new nation of Nigeria.

I have on several occasions had cause to encourage state Governors to promote the building of ring fenced 10-15 megawatt power plants with an off-grid licence. At modest costs of one million US dollars per megawatt they would lead Nigerians from darkness into light with only two towns in their states serviced by 10 megawatt plants. Many of them spend more than that on unnecessary travels.

It is centralized and more complex National grid based initiative that has highlighted the human capital challenge. The management flows that have characterized the process have been legendary as were highlighted by the Ndudi Elumelu House of Representatives probe panel's work that revealed logistics and sequencing nightmares. The need for project management skills showed through as machinery for the power schemes were lying at the Ports for reasons such as the bridges on roads to their final destination being inadequate, to problems of sequencing with several contracted parties to the implementation not being well synchronized.

Then there is the almighty corruption. It certainly is more attractive for corruption to do huge centralized projects than to manage smaller plants. Yet Vietnam has quickly overcome post war challenges by building many of such plants. Even Brazil with many other options has so many of such plants.

As stakeholders professionals need to call both the people at the central and in the state to account for their stewardship on the power question in Open Town Hall Meetings such as this. Pressure must then be put on all for a regime of sanctions if SMART (Specific Measurable, Attainable, Relevant and Tangible) goals proposed are not achieved. Of course we showed reward and celebrate those that achieve the goals. The resource gap often blamed for failure to reach goals does not hold here. Besides the resources wasted in governance are enough. Professionals ought to challenge the political class on the cost of governing in Nigeria. It should include being ready to get the NBA, ICAN, NMA, etc to mass up in front of the National Assembly until more resources go to the urgent national challenges rather than the pockets of legislators. Personally, I have been pushing for constitutional reforms that will abrogate the various full time legislatures we have in favour of part time citizen legislatures.

As we make savings from reform, an imperative given the waste of more money on power sector investments in Nigeria between 1999 – 2010 than Nigeria earned between 1960 – 1979 when the power situation was bearable, whether from targeted reduction of the cost of government or reduction in corruption in power sector project; we must ask how to most efficiently channel these scarce resources. Through the years I have suggested that national revenues be captured into three accounts. These are the distributable pool or FAAC account, a stabilization account and future fund.

The FAAC account should attract no more than 60% of Oil revenues up to an Oil price of 60 USD a barrel. Only this portion should be available routinely to the three tiers of government. Ten per cent of revenues should go into a stabilization fund while the rest go into a future fund. While the future fund should be invested abroad for future dividend yields to coming generations or in long term value infrastructure that will benefit many generations, it is, however, the stabilization fund I am particularly concerned about. It is essentially there to help manage income volatility so that if revenues fall below a benchmark, the account can be drawn from to augment the FAAC account.

This will help reduce the challenge of abandoned projects and the worst consequences of Dutch disease. But the stabilization Funds is of relevance in this discussion for how it can be deployed to ensure electricity is affordable by all. I hear already the call for appropriate pricing; I agree that if we do not pay the appropriate price investors will not enter the power sector. But I do not believe the poor should be penalised for years of political elite brigandage in the corruption of the power sector. We need a level of cross subsidisation of the poor by the rich and a system of further subsidiaries for the poor from the stabilization Fund.

With a quality NERC in place, the Commission should be able to do power what an Ernest Ndukwe NCC did for Telecommunications. One of the key roles will be managing a process where not only does Ikoyi pay more than the average to subsidise Mushin that should pay below the average line but direct drawings from stabilization Fund to power companies in respect of certain category of consumers will ensure the power companies earn enough to encourage further investment.

There are many more issues relating to the real commitment of the authorities, know-how and know-why and the independence of NERC that need to be discussed. Let us bear in mind as we engage those immortal words from Dante's inferno that "The hottest part of hell is reserved for those who in a moral crisis take refuge in neutrality" we must go forward recognizing that we can make dry bones rise up and walk. Nigeria will rise up again. Together we can restore Nigeria.