The expected $155m (N120bn) loan by the World Bank to finance a 1.2m meter for the 11 Distribution Companies (DisCos) under its Nigeria Distribution Sector Recovery Program (DISREP) is generating uproar as local meter manufacturers claimed conditions to bid for the contract would edge them out.
The manufacturers under the auspices of the Meter Manufacturers and Assemblers Association of Nigeria (MMAAN) stated this is due to the call for tender by the Transmission Company of Nigeria (TCN) requesting contractors to provide at least $340,000 (N264.3m) as security bid to qualify for the bid.
Daily Trust reports that the loan, according to the World Bank, was to help improve service quality as well as the financial and technical performance of the DisCos by providing financing based on performance and reduction of losses.
The tender, which was made by the Project Management Unit of the TCN, wants the bidders to have an annual turnover of at least $26m (N20.2bn) in the last three years.
But the local manufacturers viewed the financial quotations in dollars as a deliberate effort to sideline its members who do not have the financial buoyancy to meet up with the requirement.
They added that the sector is already in the woods due to the failure of the Central Bank of Nigeria (CBN) to honour an earlier contract to provide meters in the Phase 1 of the National Mass Metering Programme (NMMP).
Their agitation is further compounded by the tender making provision of import duty exemption to foreign companies that participate in the bidding.
A move they stated would affect local manufacturing and export jobs that could be done in the country.
An expert who commented on the issue stated that the meters being funded by the World Bank do not give the financial institution the absolute right to control the terms of participation on the project.
When contacted the TCN said it is not the beneficiary of the project so could not comment on it.
The bone of contention
The tender which was published on March 30, classified the 11 DisCos into five lots, stated that the bidders would supply and install smart meters to the discos in 18 months once approved under phase 2 of under Phase 2 of the NMMP.
It said Lot 1 is for Kano Electricity Distribution Company and Kaduna Electricity Distribution Company, Lot 2 included Ikeja Electricity Distribution Company and Enugu Electricity Distribution Company; while Lot 3 has Port Harcourt Electricity Distribution Company and Benin Electricity Distribution Company.
Lot 4 has Abuja Electricity Distribution Company, Jos Electricity Distribution Company and Yola Electricity Distribution Company and Lot 5 includes Eko Electricity Distribution Company and Ibadan Electricity Distribution Company.
It added that the meters which would be in 4G Cellular & Head End System Software (HES) would require bidders to produce bid security to the tune of $340,000 for Lot 1, $396,000 for Lot 2, $407,000 Lot 3, $450,000 for Lot 4 and $385,000 for Lot 5.
It also sought an annual turnover of the bidders, which is an average in the past three years, to be; Lot 1; $26.7m, Lot 2 $30.6m, Lot 3 $31.7m, Lot 4, $35.3m and Lot 5 $29.6m.
It went on to state that bidders would show they have engaged in at least two similar projects in the last five years with each of the project valued at least for Lot $16m Lot 2 $18.3, Lot 3, $19m, Lot 4: $21.1 and Lot 5 $17.8m.
Why local manufacturers can’t qualify for bid
The dollarization of the bidders application, according to the Acting President of MMAAN, Ademola Agoro, an engineer, showed the World Bank wanted to outrightly exclude local manufacturers from participating in the meters supply.
Agoro, when contacted by Daily Trust, said, the project, allowing the option of fully built meters and giving Import Duty Exemption Certification (IDEC) to foreign companies to partake in the bidding process confirm their fears that the bank wants to take Nigerian jobs to other countries.
He explained that such a move is against the Backward Integration Programme that exists in the sector, which is aimed to protect local manufacturers and provide job opportunities for Nigerians.
While expressing regret that the sector is already undergoing pain due to the CBN backing out from the Phase 1 of the National Mass Metering Programme (NMMP), which it should fund to provide 4m meters to Nigerians, as they yet to recoup investments made to qualify for the contracts, he said its last evaluation of the sector showed it is worth just N5bn.
“For you to be able to qualify for the bid, you must have up to $26m as turnover, how many Nigerian companies can boast of that. Coming up with a procurement qualification that stressed on the need for you to have dollars indicated a sinister motive to kill the local industry.”
“The investment we have made in the sector since the government came up with the idea of mass metering is a lot. Based on the independent analysis that was done for phase 1, our capacity was over N5bn for all the companies and 35 companies signed the contract to provide the meters which the CBN refused to pay for. Our argument is that if we can provide the 4m, why should the government want to do 1.2m meters now and give it to outsiders.
He added that by the time the government allowed phase 2 to happen, it is finally snuffing the life out of a sector that is having difficulty breathing.
He stressed the recent uproar on the matter was not to fight the government but for it to tell its agencies to look at the policies critically before implementation.
He, however, said it is engaging the agency involved and urged the president to reverse the tender to avoid the total collapse of the sector.
The Secretary of MMAAN, Duro Omogbenigun, said the tender, which closed on July 11, 2023, if left to continue, would amount to a constructive breach of the award of contract(s) for the phase which 34 of its members signed.
He also called for a direct consultation among local stakeholders during the suspension of Phase 2, to create viable options and strategies to restructure the evaluation criteria and guidelines of the World Bank Bid to prioritise local meter manufacturers.
Non reversal portends danger for power sector – MAN
Speaking with Daily Trust, the Director General of the Manufacturers Association of Nigeria (MAN), Segun Kunle Kadir said if the government continues with the bidding, it portends grave danger for the power sector and could be a repeat of the ugly scenario in 2012.
“This was when local manufacturers were sidelined in the meter supply and the nation was greeted with substandard meters by the foreign companies awarded the contract and they were later removed from the network.”
He said the financial requirements and the technical specifications by the tender is skewed against local manufacturers as they are outrageously stringent and negate the CBN guidelines for the implementation of NMMP.
While stating that the conditions set in the tender is not in sync with the country’s overall national economic development objectives, he said the sector’s potential to provide employment opportunities to Nigerians will completely pale into insignificance.
“It should be recalled that, in keeping with the Federal Government’s backward integration policy and the advent of the NMMP intervention, manufacturers have made huge investments in the expansion of manufacturing capacities, trained and promoted highly skilled workforce to meet the demands of the power sector as envisaged in the NESI.”
It’s ploy to make Nigeria dependent on World Bank – Expert
On his part, the Executive Director of PowerUp Nigeria, an energy consumer advocacy group, Adetayo Adegbemle, said the harsh conditions given to qualify for the loan was to make the country dependent on the bank with the aim of getting debt servicing.
He stated that while the bank has the right to tell Nigeria what to do with the loan, it can’t tell the country how to use it.
“This is like the Chinese loan for the railway sector where they came to implement it and brought their people in to work on it, but the difference here is that we have the capacity to execute the project. What would be the benefit of the loan to us when they still expect us to pay back the money? What the World bank wants to achieve is for Nigeria to take the loan, spend it and continue to service it whereby we will remain dependent on them.”
He admitted that the loan would deepen the capacity of the local industry, as a company given the contract to provide 100,000 meters in three months would have to increase its workforce to meet up the workload and deliver on time.
“With the current condition, maybe only or two local manufacturers can meet up with it, some people are saying why can’t they form a group to apply, what will happen is that when they are given the money, they will go and buy from China, or Complete Knocked Down (CKD) to come and assembly here, at the end of the day, China keeps their own industry alive while in another 15 years, we will go back to China when the meters are no longer working.”
He however said when they are provided by local manufacturers, there would be a lot of ripple where the money would circulate within the Nigerian economy, resulting in manufacturers sourcing for loans to get raw materials to produce more meters and meet up with an 8m meter deficit in the country.
When contacted on the issue, TCN’s General Manager, Public Affairs, Ndidi Mbah, said the company is not the beneficiary of the project, as such, she has no comment to make on it.