BPE spent $4bn power sector assets sales proceeds on salaries, pensions – Saraki

BPE spent $4bn power sector assets sales proceeds on salaries, pensions – Saraki

Bukola Saraki, Nigeria’s Senate president has berated power sector practitioners including the Bureau of Public Enterprises (BPE) who he said spent the proceeds of power sector privatisation on paying salaries and pensions.

At a two day stakeholders Interactive Dialogue/Workshop on the Nigerian Power sector organised by the National Assembly for February 7and 8, to discuss the ills confronting the sector, operators, regulators and national assembly members bared their minds on the challenges confronting the sector.

“The BPE did things that were inexcusable. To imagine that even the sale proceeds of about $4bn was solely spent towards the payment of pensions and staff. Not one single kobo was expended towards catalyzing the sector back to life.

“We cannot shy away from the fact that inexcusable mistakes have been made in the past that brought us to this point and we must be willing to face up to them and clearly delineate them in order to ensure that we do not return to the mistakes of the past

Saraki reiterated the deficiencies of Nigeria’s 2013 power sector privatisation including sale of discos to individuals and parties who lack competence to manage power distribution, issuance of licenses to based on cronyism rather than rather than capital adequacy, market experience and capacity to deliver.

“GENCOS bought generating units without a clear assurance of source of gas to fire plants and government had no active roadmap for delivery of a gas market infrastructure to make this happen,” Saraki said.

“Yet gas companies and the IOCs were exporting our gas out of our shores to create gas markets elsewhere in Europe and Asia while we languished in darkness as a result of incessant, persistent and erratic power outages.

“In the face of all these our people continued to be called upon to bear inexplicable bills estimated beyond rationale service value.

“While privatization is a right policy recipe to pursue in order to put in place a power sector that can galvanize our economy, we forgot that the participation of the private sector is not an end in itself. We neglected that unless this is done, observing transparency, competition, transaction integrity we might end up with a sector worse than the past.

But the problems in the sector are more nuanced. Nigeria’s power sector has a N1trillion liquidity gap due to huge debts by electricity generation and distribution companies and end users.

The assumptions on which electricity tariffs were fixed including foreign exchange, inflation and gas prices have long been rendered obsolete.

The Multi Year Tariff Order (MYTO) of 2015 was arrived at with gas prices of $2.44/mmbtu which now hovers above $3, inflation rate of 13 percent that has since risen to 18.55 per cent according to figures Nigerian Bureau of Statistics (NBS).

Foreign exchange rate was based on $1/198 but a dollar now hovers about $1/N500 and this has constrained the importation of maintenance parts for power assets by electricity generation companies and the price of feedstock.

Babatunde Fashola, minister of Power, Works and Housing said the problems in Nigeria’s power sector was beyond what prayers can handle as he called for strategic thinking and increased action on the part of stakeholders.

However, experts disagree that enough strategic thinking is employed in policy formulation.

“A big problem is that government does not see renewable energy as a priority and are not implementing policies that will grow the sector,” says Anita Nana Okuribido, president of the Council for Renewable Energy, Nigeria, (CREN).

Regardless of all the talk of diversification, Nigeria has not created policies that will drive it in the energy sector despite abundance of energy sources including sunlight, wind and water.

Government has not removed duties on batteries, encouraged foreign companies to establish renewable energy plants through tax rebates or even get it acts together to install NERC chairman and commissioners to approve required policies.

“Without fixing power, all the talk about diversification will not achieve much desired results,” said Tony Elumelu, chairman of Transcorp Plc.

Elumelu called on the government to show it wants to revive the power sector by prioritising it, fixing liquidity issues that has seen debts to Transcorp soar to N50bn and liberalising the gas market.

Elumelu said gas pricing to be market driven as price fixing does not really work. He also called on the government to create enabling environment for gencos to harness idle gas fields to provide gas for their operations.

 

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