What they did not tell you about power project under Obasanjo

You have heard that $16billion was ‘wasted’ on power projects under the watch of Olusegun Obasanjo as President.

That line of argument is not original to President Muhammadu Buhari. It was actually first initiated by President Umaru Musa Yar’Adua, who alleged that $10billion was spent on power by his immediate predecessor.

Days later, the figure climbed to $16billion. However, he did not initiate any probes to determine actually how much the previous administration burnt on power generation. He also did not invite his predecessor for explanations. But The House of Representatives did.

The Ndudi Elumelu Committee

The House of Representatives, led by Dimeji Bankole, empaneled its Committee on Power, chaired by Hon, Ndudi Elumelu, to open inquest into how $16billion was spent on the power during Obasanjo’s eight years in power. The committee started sitting in January of 2008. The Committee held public hearings and visited sites of various power projects to accomplish the assignment.

From its public hearings, dirty details of how Nigeria’s top elite, fronted for the power companies with some sitting on the boards of the companies as chairmen.
However, the Elumelu panel could not submit a report of its finding because it was caught up in a bribery allegation. The Committee was accused of a N5 billion bribe. Focus on the bribery allegation impugned integrity of whatever work the committee did.

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The House of Representatives moved in to save the situation by asking its committee on Ethics and Privileges to investigate the bribery allegation. After its work, the Committee exonerated Elumelu and members of the committee and said the bribery allegation was unfounded. Report of the Ethics and Privileges Committee was presented by its Vice chairman, Hon. John Kalipa. This paved way for the submission of the report by Elumelu. By this time, interest in the probe had waned. The bribery allegation achieved purpose. However, when Elumelu was called upon to lay the report on October 10, 2008, he pulled out a Ghana-Must-Go bag containing volumes of the report which were in paper and CD-ROM editions. Though the report was not discussed, Bankole hinted that details from the Committee indicate that $16billion may just be an understatement.

Setting up of NIPP

The Obasanjo Power programme was driven on the background of the National Integrated Programme on Power (NIPP) which was set up in 2004 as government funded intervention to quickly add generation, transmission and distribution capacity to the electricity supply system. The target was to ensure addition of 2251 Megawatt to the national grid.

NIPP Targets:

• To generate 10,000 mw by end of 2007 from existing Power Projects, new facilities and Independent Power Projects, IPPS,
• Develop capacity to transmit and distribute the increased generation,
• Develop a medium term investment plan to 2010 for the sector,
• Reform the Power Sector by allowing for private sector participation and increased efficiency; and,
• Exceed MDGs target of access to electricity.

Committee To Drive NIPP Programme

• Senator Liyel Imoke, Minister of Power and Steel – Chairman
• Dr. Ngozi Okonjo-Iweala, Minister of Finance – Member
• Engr. Funso Kupolokun, GMD, NNPC – Member
• Engr. J. O. Makoju, MD, NEPA – Member
• Dr. E. Daukoru, Presidential Adviser (Petroleum/Energy) – Member
• Prof. Ade Ojowu, Economic Adviser to the President –Member

Involved With NIPP At Different Stages

• President Olusegun Obasanjo
• Senator Liyel Imoke – Former Minister of Power and Steel
• Alhaji Abduhamid Ahmed – former Minister of State, Power and Steel
• Dr. Olusegun Agagu – former Minister of Power and Steel
• Engr. Joseph Makoju – former Managing Director of PHCN
• Engr. G. O. P Osakue – CEO, TCN
• Engr. (Dr.) C. E Ifesie – Head Transmission, TCN
• Engr. Mike Ezeudenna – AGM (Lines) TCN
• Engr. C. N. O. Nwachukwu – Chairman, Technical Committee
• J. A. Olotu – Managing Director, NDPHC/NIPP
• Engr. I. Onuoha – Deputy Chairman, Technical Committee
• Engr. Emmanuel Okonkwo – Project Manager, Distribution
• Engr. Tope Onadipe – Project Manager, Gas
• Engr. Sam Gekpe – MD/CEO, Rural Electrification Agency
• Engr. Ayodele – General Manager, Technical Services
• Mr. J. C. W. Balami – Head Finance, NIPP.

Also

Bola Ige and Olu Agunloye served as Ministers of Power at different times under Obasanjo

What Imoke Said About Power Probe

1. In view of the long gestation period for constructing new power projects, a number of short term actions were taken to address the power crisis in 2000.

2. The short term interventions in 2000/2001 did provide improvement but was meant to be followed (within the next couple of years) with new capacity additions (this however did not happen due to the vacillation in 2002/2003 over government policy, and which threatened to roll back some of the gains). It needs to be recognised that this threat is once again upon us due to the impasse at which we find ourselves today, as government takes its time inconsidering the “source of funds” for the NIPP.

It may be useful at this juncture to look at the often quoted South African example. South Africa with a population of about 50miillion has an installed capacity of 40,000MW, butdespite this, it has recently gone through a period of power cuts, to the extent that it has had to look at stopping the export of power to neighbouring countries. The sole reason for this situation was that it failed to plan ahead, and invest ahead of time, to bring in new power capacity to meet expected increased demand. It is further enlightening to note that South Africa through Eskom will now invest 150bn Rand (approximately US$21bn) over the next five years to secure its power supply.

3. Given the long gestation period of power projects (and the fact that funding to some of these projects ceased) a good number of these projects are on-going (uncompleted), e.g. it takes 12 months after full payment to take delivery of a150MVA transformer, and other components can take much longer. Furthermore, the vagaries of weather and the security situation at host communities, pose further challenges towards the timely completion of NIPP projects.

4. Power projects in many instances have to be fully completed to become operational. Hence the impact of the large number of on-going projects will only really be felt by the public when these projects are fully completed/commissioned.

5. The total expenditure on the power sector from 1999 to 2007 is approximately US$6bn of which Rural Electrification was US$455mn, PHCN US$2.25bn, and NIPP US$3bn (please see Appendices 2 and 3, for additional details). Direct implementation of power projects from the Ministry of Power and Steel – e. g., solar, small and mini hydro, consultancies, etc, account for the balance.

6. Although the NIPP accounts for approximately US$3bn, it should be recognized that significant amounts of this money still remains in escrow with the CBN and/or tied down to specific Letters of Credit that will not allow for its release without the contractors having reached certain certifiable project milestones. Advance payments that may have been given to any contractor are covered by bank bonds, and so the risk exposure to the Nation is fully mitigated.

7. Nigeria will not see the benefits of the NIPP expenditure until all the component parts are commissioned. This may be the reason that questions are being asked as to why after such large investment, that there has been no seeming commensurate improvement in the power situation. It took the last administration over five years to understand this about the power sector. It is hoped that there is now enough of an institutional memory in Nigeria to prevent us from having to repeat this long learning curve, especially if Nigeria is to achieve her developmental goals.

8. The nation faces increased project costs under the NIPP as long as the project is kept in limbo. There are numerous factors that cause these cost escalation, but they include demurrage charges for goods kept in storage or left at theports, deterioration of works due to project delays, penalty payments, inflation, remobilization, etc.

9. It should be recalled that before the commencement of these various programmes, Nigeria suffered from numerous system failures associated with underinvestment, poor infrastructure maintenance and development, the impact of which has been ameliorated through improved investment, which needs to be sustained.

10. It needs to be recognized that continuous investments have to be made to not only maintain the gains, but to also meet growing demand. The gains of recent investment will not be seen until the full investment and development plan is brought to its logical conclusion. It must be added that similar emphasis needs to be placed on the development of gas infrastructure in order for the proper fruition of these investments.

11. The various programmes undertaken are viable, and once completed will greatly contribute to solving the infrastructural deficiencies and undercapacity of the power “system” thereby reducing pre-existing shortcomings. The goal can still be achieved within a reasonable timeframe provided that the decision is taken to complete these power projects. These projects can only be considered a waste if they are not completed. It is my sincere belief that thefastest way to increase capacity is through the completion of the NIPP project.

12. The question needs to be asked what would have been the possible alternatives to our approach? Private sector will only fully engage if there are commercially viable and cost reflective tariffs, or if government subsidises tariff and/or gas supply, and the network has the capacity to evacuate the power to areas of demand. Without this subsidy the country would face a major hike in tariffs, which would be a burden too great to bear for our most vulnerable membersof society. Investors need to be confident about continuation in policy.

13. If a lasting solution is to be found for the seemingly unremitting Nigerian power problem, then the Power Sector Reform Programme needs to be taken to its logical conclusion. It is only then that Nigerians will get their longawaited relief.

By Femi Qudus…

 

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