Ambassador Godknows Boladei Igali was the Permanent Secretary in the Federal Ministry of Power who superintended over the power sector privatisation of 2013. In this interview with Daily Trust, he spoke about how to fix the current liquidity crisis and teething problems.
The privatisation of the power sector seems to be faulty. What is the way forward for the sector?
The power sector story is simple. With the privatisation, we should look forward and very fast. Our privatisation was termed by the World Bank as the most comprehensive sector privatisation in the world ever. You have to know that the people who bought those assets must have borrowed money to buy.
The government has to guarantee the borrowing of cheap money from Development Financial Institutions so that instead of going to borrow from the local market at about 20 percent interest rate which will make the tariff too high, they can borrow from World Bank or the African Development Bank (AfDB) at about six to seven percent interest rate. They will make this money available to the privatised companies as loans repayable over a long period of time for them to upgrade and improve their infrastructure because the assets that were sold were old ones.
What do you make of the privatisation so far?
NEPA assets were dilapidated and there is a level that the firms, particularly the DisCos are modernising. Before now, if you go to some places, the poles were bent and cables fallen off. They had to do a lot to build all those things and they need to borrow a lot of money to do that.
When I was acting Minister of Power for about seven months in 2015, I told President Muhammadu Buhari that we have to borrow money. Under former President Goodluck Jonathan, the Central Bank of Nigeria (CBN) borrowed the GenCos and DisCos about N213 billion and they were able to improve but there is a big market gap that has to be done by heavy borrowing.
How should this borrowing be done?
Government is still 40 percent owner of the DisCos, so if we are borrowing, it is the right thing to do as government is still the owner, and government still reserves the right to take these things back. Government is the 20 percent owner of the GenCos, so if you are borrowing it is for itself. What we need to do is to increase the number of presence of government officials in the privatised companies. Instead of low level officers, it has to be directors and permanent secretaries sitting there; or government can appoint very senior people that are non-government people to sit on the board of Abuja DisCo and others.
If government is not satisfied with the civil service, it can appoint from any place but not junior officers . If you appoint seasoned people, they will talk when they see things are not going right.
Do you think the power sector challenges would be resolved soon?
The power sector solution is a medium issue and very soon, Nigerians will see power because everything is there. We have the capacity to generate 12,000 megawatts (MW).
When I was in charge of the sector, each time we got to about 4,800MW, everybody was happy. During that period for about four months in 2015, they said the new sheriff is in town and people said it was Buhari’s body language that was responsible for the stable power supply. I know the things I did; I had to go to the creeks and talk people saying don’t vandalise, and I engaged the people in the power industry and moving from Abuja DisCo to Ibadan DisCo and to others to see what is happening and make things functional.
Fortunately, the minister of finance has said government is borrowing $3 billion for the power sector. That is what should have been done since. There is a repayment mechanism in the power sector through tariff payment.
The investors could not borrow from the local banks where they had borrowed to buy the assets. There is also the issue of wrong assumptions by the privatisation transaction adviser which did not turn out well. There is an assumption that power will increase but power is not increasing because of this trap they found themselves in. New generation is not coming up and even the 14 licensed solar Independent Power Plants (IPPs) have not taken off; we are not increasing capacity to generate.
However when government borrows the money, let it have greater control and supervision at two levels. First, the Nigerian Electricity Regulatory Commission (NERC) should not sit in Abuja. The officials should follow the companies all the time, monitoring them. They should not borrow money and spend it on luxurious cars but they can buy operational vehicles to solve problems.
Secondly, government should have senior men and serious people on the boards that will not be compromised.
For now, let the money government is borrowing come and they should give it to the companies on a performance-based term. Some of the money can be paid directly to the Original Equipment Manufacturer (OEM) for those things that needed to be fixed in the sector.