Nigeria’s businessmen are celebrated traders, not investors — Prof. Iledare

The power sector has, of recent, been hit by serial system collapse, causing the Distribution Companies, DISCOs, and the Generation Companies, GENCOs, to call for the privatization of the Transmission Company of Nigeria, TCN, which, according to them, remains the weak link in the chain.

The TCN is saddled with the responsibility of distributing power to the DISCOs from the GENCOs. In this interview, the National President of Nigerian Association for Energy Economics, NAEE, Professor Wumi Iledare, speaks on what should be done in the power sector for profitability and why the TCN cannot be sold at the moment.
By Ediri Ejoh

The power sector has in recent time recorded system collapse six times, leading to the argument by stakeholders, that the system should be reviewed as Nigeria has never generated more than 2,800 MW steadily for three days in the last 12 months. What is your take on the issue?
First of all, we need to go back to the Electricity Reform Act, ERA. I think it was passed in 2005, and this is 2017 and it needs to be revisited. Also, I think we need to understand the power sector and the situation we find ourselves. The power sector is better when it is practically integrated. Right now, it is not a monopoly, but it is not fully competitive. The transmission is a monopoly because the investment required is huge. But for the DISCOs and GENCOs operations, joint venture would be what we need. Three, we have Discos that we don’t know whether they are a monopoly or not, because we have independent power generation with them. You need to have an understanding of the structure of the industry, and that is the biggest challenge here. We don’t seem to understand the economics of the electricity industry. We don’t have sufficient energy professionals in Nigeria. Majority of the people are self-made and do not even understand the structure of the energy industry in terms of governance, performance and conduct.
Let’s look at the Discos, they can’t even invest, they can’t install meters, so how are you going to know the amount of energy required. When you go to the National Planning Commission, what is the relationship between the Energy Commission of Nigeria and the Ministry of Petroleum? Those are the issues. That is why we are talking in terms of structure. The governance of the energy industry in Nigeria, power, oil and gas, is still very weak. There is nothing you can build on a weak structure that can stand. And for us to copy the regulatory frame work for a developed economy, when the structure to support it is not there, it is a fallacy.
All of these issues surrounding the power sector can be handled appropriately if only the Reform Act will be revisited.
What do you make of the blame game in the power sector, what is the way forward?
You need a Nigerian Electricity Regulatory Commission, NERC, that is not captured by the DISCOs or the GENCOs or the TCN because it is supposed to be the sector regulator. NERC is the one that should sanction and reward, in that case, this is where I am talking about capacity building. The DISCOs need capacity to be able to know how much tariff they need for their investments. NERC needs to know how much tariff to allow to support the investmens. That means the professionals will sit on the table and discuss and come to agreement as to the appropriate tariff that would bring normal return on investment. Because when you don’t invest, there cannot be return on investment. And if you don’t invest, you will not be able to generate enough capacity to meet demands. 4000MW electricity for Nigerians on the national grid is a joke for the potentials of this economy. We need to revisit the DISCOs, the area they have been given to manage.
How can you go from Ibadan to Lokoja as your captive market without a development, zonal and regional space? To me, it is a joke.
I do not support that. But I do not mind a review of that agreement on whichever of the DISCOs that is not performing on the basis of key performance indicators. They were not just given a blanket; they are supposed to be investment organisations that would have to declare returns on investment to their investors.
Are you in support of the call in some quarters for the revocation of the privatisation programme, especially the one concerning the DISCOs?
What do you do when you are not delivering to your investors? You go bankrupt. Nobody needs to sanction them as nobody holds on to what is not adding value. However, you are looking at electricity as a public service which is not, it is an economic service.
The question we should be asking is, is government ready to fully deregulate the electricity industry? The answer is no because the structure is not there to manage under a deregulated environment. We don’t have enough professionals to manage the energy industry in Nigeria.
Do you support the clamour for the sale of the TCN?
They don’t understand what they are asking for. How many investors can build transmission lines in Nigeria? If you recall, that was the same scenario before they privatized the DISCOs. People have been worried on metering and yet it has not been done. How many have they been able to supply meters? Where is the money? That is what I am saying. Majority of business people in Nigeria are traders and not investors. They are shouting and raving for the sale of the TCN. That is how we sold the distribution companies to the DISCOs and yet nothing has been done in three years down the line.
There is shortfall in capacity in the industry. What are your thoughts as Emerald Energy Institute has been adjudged to have enough capacity?
I believe we should engage in capacity building as well as local content. There are institutions in Nigeria operating international standards. Good examples are Emerald Energy Institute, EEI, domiciled in Port Harcourt, and a host of others. What Emerald is trying to do is not to develop engineers, but to develop the sub-skill. We do more with management policy and economic training, which is really to add value. Anybody that goes and invests wants value to be added. Entrepreneur skill, if you look at us, Nigeria is more or less like a celebrated trader. Even we sell licenses to all indigenous people. You win an oil bloc, the next thing you do is to search for technical partners.
Economics drives the oil and gas industry, because it is about value added to investors. So what is done here is to train people that understand the way choices are made to maximize value, not neglecting the constraints along the line. Majority of our graduates are engineers that are working in the oil, gas, power sector. Then we give them additional tools and skills that help them to better explain the concepts for value creation for investment. Nigeria is not limited when it comes to engineering capacity, as we have good engineers in the industry. We need someone who can connect ideas to get us to our expected end. And that is what we are trying to do in Emerald.
What is the synergy between Emerald Energy Institute and others to overcome the current challenges in the country?
People like capacity training in Nigeria as a means to make money for a living without delivery on what was invested on. Even if you go to people nominating for training, it is like they are doing you a favour and not that they really need the training. We must move from that selfish kind of mentality. Capacity-building is not about today, but about tomorrow.
We keep pleading with PTDF, PEF. And the question is, how much respect do they have for indigenous training? Instead of training locally, they run abroad to do it.
If we are given N10million for a student to be trained here, instead of the $30 million they spend on overseas training, we will deliver to expectations. We have the capacity here in the country.
VANGUARD