Jaiyeola: Privatisation no silver bullet for nation’s power challenge

PricewaterhouseCoopers’s Associate Director, Energy, Utilities, and Resources, Habeeb Jaiyeola, in this interview with KINGSLEY JEREMIAH, interogates critical issues affecting the power sector, especially the nation’s epileptic power grid.

What is responsible for the consistent collapse of the nation’s electricity grid?
The particular reason for grid collapse can only be obtained after appropriate investigation or technical audit. In other words, the actual reason for a grid collapse cannot be assumed as each grid collapse may be as a result of different reason. Some of these reasons could be power demand and supply imbalance as we have it between DisCos and the GenCos. The balance of power demand by the DisCos, and the power generated by the GenCos has to be maintained for the grid to be stable. So, when there is an excess in degeneration to the grid, over the demand by the DisCos, or there is excessive drawing from the grid over supply to the grid by the GenCos, then it could lead to grid collapse, especially where we are looking at the relative excess generating capability that we have in Nigeria.

When I say excess, I mean, relative because the drawings by the DisCos is not, at the moment, up to the full installed capacity of all the GenCos combined. So, as a result of that, there could be several required ramp down for the GenCos so that they can prevent over supply to the grid, and that is a technical process that requires strict monitoring. And if that monitoring is not effective, it could lead to a grid collapse, where there may be over supply to the grid, over the demand, or drawings from the grid.

In addition, maintenance of the grid or transmission infrastructure is also quite critical to the maintenance of the stability of the grid. A situation where appropriate maintenance has not be carried out, or some equipment/grid infrastructure are not recent, or are experiencing degradation could lead to grid collapse. Also, there may also be some maintenance gaps that could occur. So, clearly, the reason for grid collapse is multifaceted and can only be obtained via an actual technical audit on the grid. But these are some of the reasons why a grid could collapse.

What are the implications of grid collapse on economic and national development?
Without doubt, the impact of grid collapse on economic and national development cannot be overemphasised. Right now, the country is battling to ensure constant power supply, and a stable grid is very instrumental to achieving that objective. A lot of businesses in Nigeria rely on public power supply to ensure continuity. So, power cut has dire financial implications on businesses, including loss of contracts due to the inability to meet contract terms.

Also, when there is power outage, the chain of production is badly affected and production process reasonably affected. Sometimes some materials in the process have to be totally discarded and the process restarted. When this happens, the economic losses are usually significant, especially on small and medium enterprises (SMEs). We all know how significant MSMEs are to the country’s economy and GDP.

How does the grid collapse rob the nation of the expected gains of the privatisation of the electricity sector?
It’s not unusual for grid collapse to occur in a developing economy like ours, as economies that have been in our situation in the past did experience similar situations, while their electricity sectors were developing, and some of them are still experiencing it today, including India, which still records similar grid collapse, but keeps on improving. So, we should focus on what the government is doing, or what is being done to prevent a reoccurrence of issues that lead to grid collapses. Investment in grid infrastructure is a key measure to ensuring this, and to driving the necessary development in the grid infrastructure. When we say development, it is worthy to note that we are aware of the several strides that the Federal Government is making to pump a lot of investment into the sector, especially in the transmission sub-sector of the power industry. Without a strong, formidable and stable transmission infrastructure, our objectives cannot be met. So, the government should be encouraged to see through these initiatives, including the Siemens deal, and to ensure that they are being executed as planned. It should also ensure that teething issues are resolved as soon as they come up.

Some stakeholders are calling for privatisation of TCN. Do you think this would solve the grid challenge and other bottlenecks in the power sector?
Privatisation is not a silver bullet for solving problems. Typically, every country has to look at its peculiar challenges, from an economic perspective and thereafter develop strategies that are country-specific. So, while privatisation remains one of the tools for adequate economic development, we have to also understand that Nigeria is in a peculiar situation, where power users still require some form of understanding as it were. I mean citizens still see power not as a commodity that requires full payment, but more as a support from the government. So, at the moment, the power sector is developing, and one of the ways, which the government has been able to maintain some form of intervention in the sector is through the TCN, and also bringing in some intervention through the bulk purchaser (Nigerian Bulk Electricity Trading Company).

So, it is important that in an economy like ours, the government still retains the ability to intervene in the sector. This is quite important because most clients that have gone through a similar situation still require government support, one way or the other. Regardless, we may also look at how the TCN can be more effective in its role, and also how the Siemens deal, as we have it right now, plays into the general TCN infrastructure in itself. Therefore, the government needs to look into that to ensure that we don’t have challenges with the new deal coming up.

A seamless development of the transmission infrastructure in the country should be prioritised. As we continue to maintain a more balanced power sector, a full privatisation of the sector may then eventually come into play, but at the moment, the government still needs to be able to maintain some form of stability while making some inputs depending on how, and what matters on a periodic basis. Having said that, privatisation may not necessarily be the silver bullet for the challenges that are plaguing the power sector, but several researches into the needs must be looked into consistently so that we can ensure that the right policies are implemented at the right time.

In what ways does unstable power supply affect the Federal Government’s ease of doing business and attracting investors?
Clearly, power remains one of the key inputs in improving the ease of doing business in any country. Cost and ease of obtaining power determines whether a company would make profit or record losses. Expensive power input in any business could simply determine whether a business survives, or collapses. So, ease of doing business is clearly an area that Nigeria must continue to seek improvement in. If we look at it from the point of view of grid collapse, consistent grid collapse without improvement would typically make doing business more difficult. But like I said earlier, in a developing power sector like ours, these sorts of experiences are not totally unexpected. But the main issue is efforts put in place to address reoccurrence.

We should never lose sight of the fact that there are other factors that are critical, and impact on the grid collapse one way or the other, including liquidity in the sector, which is quite inadequate.

The impact of the lack of constant power on doing business in Nigeria is clear for new and present investors, and that is why some locally produced goods are not competitive when placed side-by-side with their foreign counterparts. However, due to the Africa continental Free Trade Agreement, we may see that other countries that are also bound by the agreement are able to transact business in Nigeria without unnecessary hindrance, like they had before. So, I think it’s actually imperative that as we go into AfCFTA, the government should accelerate improvement in the sector to enable Nigerian entrepreneurs to be competitive, and manufacture goods that can be sold in other African countries and in other world at competitive prices. Power remains one of the tools that can help us to achieve that. So, there is actually an urgent need for the power sector to be improved upon.

As of 2019, Nigeria moved up some places within the ease of doing business ranking, which was quite a good news for the country, but we still need to move up and the government is actually targeting that by 2023. I strongly think that we should be among the first 70 countries on the ease of doing business ranking. This is a very aggressive objective to meet, but it is achievable and it requires a lot of consistent policies and sustained efforts.