Nigeria’s energy conundrum, implications and solutions

 

There is a nexus between Nigeria’s petroleum and electricity sectors. Though the two are under different ministries viz. Ministry of Petroleum Resources and Ministry of Power, the former provides the ingredient for the latter. By this I mean the country’s petroleum sector provides the industrial gas for all the thermal power plants operating in the country. Some of the thermal plants are Afam Power Plc, Ughelli Power Plc, Sapele Power Plc and Egbin Power Plc.

It is baffling that despite the abundance of natural gas in Nigeria, so much so that international oil companies have been flaring this essential product for domestic and industrial use, the country hasn’t been able to sufficiently trap and tap this resource to power our electricity-generating companies. Aside from this, the price of cooking gas has hit the rooftop despite the country having this in abundance.

Quite unfortunately, the creation of separate ministries, as well as privatisation and commercialisation of petroleum products and electricity, have not been able to resolve the conundrum in the energy sector in Nigeria. Many compatriots who believed that the passage of Petroleum Industry Bill by the National Assembly is the silver bullet needed to unbundle the latent potentials in the petroleum sector have been very disappointed because after the signing of that bill into law by the President, Major General Muhammadu Buhari (retd.), on Monday, August 16, 2021, there has not been the political will to follow through with faithful implementation. One act of cowardice displayed by this regime was the continuous subsidy of the Premium Motor Spirit, better known as petrol.

It is very disheartening that despite the purported N4 trillion earmarked for petrol subsidy in the 2022 Federal Government budget, fuel shortage has been the new normal in Abuja and many states in the country since January 2022. On the flip side, proponents of subsidy, such as the various workers’ unions will claim that the prices of unsubsidised petroleum products such as diesel, aviation fuel, kerosene and cooking gas, have become very astronomic and unaffordable. Thus Nigeria is in a Catch-22 situation, a great dilemma.

Truth be told, despite the argument that prices of petroleum products skyrocketed due to the lingering war between Russia and Ukraine, I am of the considered view that Nigeria is worst affected due to our inability to locally refine our crude oil. It is disheartening and heartrending that despite billions of dollars spent on turnaround maintenance of the country’s refineries in Port Harcourt, Warri and Kaduna, none of them is working at present. Additional $1.5 billion was borrowed to carry out TAM on the Port Harcourt refinery last year but it is unclear if this offers any hope as previous ones conducted never brought any relief.

The other prospect Nigerians are eagerly awaiting is for the 650,000 barrels per day Dangote refinery to come on stream latest by the first quarter of 2023. Interesting news broke recently that the Nigeria National Petroleum Company on behalf of the Federal Government of Nigeria is planning to pay $2.76bn to acquire 20 per cent equity in Dangote Oil. $1bn out of the agreed sum was paid by NNPC last week.

There’s no shortcut to the top of the palm tree, it’s the way you climb up that you’ll come down so says a Yoruba proverb. Without full deregulation of Nigeria’s energy sector, by that I mean the petroleum and electricity (power sector), the Nigerian economy will continue to be badly and negatively impacted. Yes, prices of these commodities are astronomic now largely because of the war in Ukraine and the fact that we have to import these essential products. If there’s self-sufficiency in local production much of the foreign exchange used to import these refined petroleum products would be saved. Acquiring stake in Dangote refinery is a step in the right direction but monopoly would be bad for our economy. More direct foreign and local investment in Nigeria’s oil and gas sector should be encouraged so that competition will force down prices as witnessed in the country’s telecommunication sector. Thus, full implementation of the Petroleum Industry Act is needful.

As for the electricity challenge, this is a sector that has defied all solutions, again due to lack of political will to do the right thing. Information on the website of the Nigerian Electricity Regulatory Commission says “The Electric Power Sector Reform Act was signed into law in March 2005, enabling private companies to participate in electricity generation, transmission, and distribution. The government unbundled the Power Holding Company of Nigeria into 11 electricity distribution companies, six generating companies and a transmission company. The Act also created the NERC as an independent regulator for the sector. At present, the Federal Government has fully divested its interest in the six GenCos, while 60% of its shares in the 11 DisCos have been sold to private operators. The Transmission Company still remains under government ownership.” I propose that Electricity Power Sector Reform Act should be comprehensively reviewed. Many of the DisCos and GenCos have failed to live up to expectations. They have severally breached the terms and conditions in the MoU signed with the Federal Government.

Take for instance the issue of free metering. Despite the initial plan to make free meters available to their customers, these DisCos have reneged on this and at present sell these meters at astronomic prices.  Daily Trust newspaper in its March 13, 2022 edition did a fact check on the claim by the Power Minister, Abubakar Aliyu, that meters are free and discovered that it was a false claim.

Without meters, DisCos rely on estimated billings preferably referred to by consumers as crazy billings. This impunity has been allowed to continue as the DisCos continue to rip off electricity consumers. On top of this, despite billions of dollars spent to provide electricity for the country, the available supply is very paltry. According to this newspaper, in its yesterday edition, power supply has dropped by 70 per cent. This has made Nigerians rely on private electricity generator engines of various shapes and sizes with their attendant environmental pollution. This newspaper in its last Sunday, July 3, 2022 edition reported that “Over 40 per cent of households in Nigeria own and use generators to meet their electricity requirements, figures contained in a power sector report jointly put together by a research firm and a financial institution showed. It also stated that the affected households spent about $14bn annually to fuel their generators, as the power supply from the national grid continued to falter.”

It is this deplorable power supply that has made fuel consumption increase exponentially as many compatriots now rely on private electricity generating machines as the main source of power supply. The negative impact of this is that it has led to a hike in the cost of goods and services. It was reported by many news media last Monday that University College Hospital, Ibadan now charges N1,000 per patient as electricity bill daily. This shows that unless a lasting solution is found to bring the cost of energy down, prices of goods and services will continue to soar leading to reduction in the standard of living of Nigerians.

There is no gainsaying the fact that corruption plagues the entire country’s energy value chain, be it the electricity sector or the petroleum sector. This is part of the reason billions of dollars in investment into the sector hasn’t yielded positive results. Unless and until the energy sector is rid of sharp practices and malpractices, all the initiated reforms will be tantamount to mopping a leaking roof!