A few days ago a national newspaper reported that the electricity tariff will increase by 80 percent, how true is this and is this a sign of what we should expect from foreign investors?

In terms of tariff increase, you may be surprised that it’s like paying for nothing. If you don’t have power you insist on paying such a small amount of money for electricity and then you know that you are not going to get electricity because nobody will come to invest. In Nigeria today, the tariff for electricity is second lowest in Africa, other than Zambia which pays the lowest tariff in sub-Saharan Africa. And we are not the poorest country you know that in West Africa we could even say that we are the richest maybe not on per-capita basis, but what we want is for Nigeria to be at least in the middle in terms of electricity tariff. But what we are talking about is actually for the upper income people. Whatever tariff increase that you are talking about is for the upper income persons. The urban poor and rural dwellers will not see this tariff increase because there is subsidy in place to ensure that this doesn’t happen and even when subsidy goes out in some years to come that there is some subsidy that will ensure that lifeline consumers will continue to enjoy electricity at the rate that they can afford to pay. So it is not the same as when you had the fuel subsidy issues where we have an average. Everybody is paying basically the same thing. But it is not the same with the electricity tariff. There is what we call C1 tariff which covers the welders, seamstresses and other small scale industry people pay very low tariff, they are subsidised in the regime that is in place. So this has been properly structured and worked out as it is done everywhere in the world.
 

What is the government doing to actually make electricity available to Nigerians?

What I need to point out is a two-prong approach that government took in addressing the power sector reform. One is to have short term measures, and the medium and long term. Contrary to what anybody will tell you that power plants are built in three to six months, it is not so. You can only do emergency power that way, that is somebody bringing the equivalent of generators using diesel to run them or you use some other fuel to run them and then when it comes to tariff then they will charge you about three or four times the tariff, so who is going to pay? That is why we have not gone that route. But if you want to really build a sustainable power plant, it takes a while, minimum is usually about two years.
What we are trying to do is to see what we can do within this period before we begin to get the benefit of new plants that are being built, and that is by recovering capacities in already existing power plants that are just there because maybe one thing went wrong with the turbine or something in the power station. So we want to recover the capacities and that was what we have actually done in the last year or so. You will find that when we came on board we had about 2,800 megawatts now we are talking about 4,400 megawatts, even though I don’t want us to talk about figures. There is tremendous growth in the power sector just within this short period but it comes from focusing and recovering of installed capacities that are just lying dormant.
Secondly, and I believe that most Nigerians would have seen this, there is greater stability. People may have forgotten how it used to be, power supply was epileptic. But it is not so any more. We are not saying that you don’t lose power but we are saying that we have greatly stabilised power on the national grid.
Thirdly, we used to have whole system collapse, we use to have three to four whole system collapses every month, which means that the entire system will just shut down and the power plant would have to be recovered, and it could take a day or a day and half even up to two days. In fact this year, I am happy to announce that we have not had any system collapse at all; none in January, and none so far in February. There was just one partial system collapse in December. All this is because of measures that we have taken. So there is a lot going on but we have to say that Nigeria is a country of about 167 million people. To talk about 4,000 to 5,000 megawatts, that is nothing because you really need to do these things I talked about, which is why the long term measures are important, to have appropriate investments. It is not about putting so much cash by the government in it, it is all about how the system is structured to deliver power with the appropriate investment. So we are doing all these things.
 

Some staff of Power Holding Company of Nigeria, PHCN, said that they have been left in the cold. Now you have come up with the distribution company and you want to hand them over to the distribution companies. But they are saying that if you do so without giving them their entitlements, these distribution companies will not accept them as their liability. So, why haven’t you given them their entitlements before you distribute them?

Also about the issue of generating power and using the power generated, as in the case of the Rivers State government, are you telling us that the Act has been reformed in such a way that someone can generate power and sell it?
Talking about workers- the electricity that you receive wherever you are is coming from government isn’t it? Abuja Electricity Distribution Company is owned by the government. Ikeja Electricity Distribution Company is government owned; Kaduna, Yola, Kano, Ibadan, Enugu, Port Harcourt etc they are all government owned. So we are redeploying headquarters staff that are doing nothing at the headquarters to the government owned companies and transferring their salaries and benefits to states. So how can anybody quarrel with that? Would it be better for Nigerians to keep paying somebody that is sitting in the headquarter doing nothing, folding his hands? In fact the labour union should be the first to go to fight against that. In this country we have to do things the way it ought to be done, and according to law. The Act was enacted in 2005. So whatever we are doing we must ensure it is done according to the law. The workers at the PHCN headquarters are being redeployed to the various successor companies. We are not sacking anybody so why would we have to pay them their benefits? You cannot say we should pay their entitlements as if they are being severed – they are not! They are not being sacked from service. When the privatisation comes on stream and it is being completed, then that severance will come. At that time, it is not about transfer or redeployment to a particular successor company. it will be about change of ownership. There will be severance from the federal government to terminate the agreement between the government and the workers, while a new agreement will come from the private companies or the privately led companies to take the same workers as their own workers, so it is not actually that they are sacked from service. Where will the new owners get workers? It will have to come from these people.
Secondly, if you look at that, you will find out that we don’t even have enough number of workers. We still need more people, but we need competent people. So if on the other hand, people are saying anybody who does not want to work, we just have to keep them, I don’t think you will like that, I don’t think any Nigerian would support that. I think, what we as Nigerians would want is that we are up and doing, so we have people who are ready to work like in any other place in the world. The reasons why people go to Korea, Japan and various places to invest is because the people want to work and they work hard. They don’t go to office to just sit and be paid. So that is very important.
Now, about state participation, it is very important. Anybody who wants to generate electricity today can generate electricity and sell the electricity to the national grid or sell the electricity to a distribution company. There was a discussion on the prompting of Rivers State that you are talking about. The national economic council which is made up of the governors of this country set up a committee under the vice president. So this committee of the governors and my self and some key stakeholders in the power sector met and came to an agreement on how things would move forward in terms of state participation and the agreement is basically as follows: that states should be able to generate power, invest in power and domicile that power within their states if they so choose. Because what every governor wants is to be able to provide this service to their people, so if a state government can build a power plant they should be able to domicile that power coming from that power plant for the state. If they have excess, they can sell the excess to the grid, either local grid or national grid.
Also, the state governments that fall within the distribution zones, the 11 distribution companies, for example: Abuja Electricity Distribution Company includes: the FCT, Kogi, Nasarawa and Niger State. So all the governments of these four states and Federal Capital Territory, FCT can now take equity position in the new entity. How would that work? Each governor that says his government has over time invested in rural electrification will choose a valuer between the state governments and the regulatory commission, which is the arbiter between everybody. Now this valuer will go to value the investment and whatever that value is, becomes carried interest in the successor companies. So they get equity as such. Now if a state government wants to invest more than that carried interest, they are free to do so, provided that at the end the joint equity positions of the state government, federal government and the workers will not exceed 49 percent. There is a proper business structure that makes sense and they all agreed, so that is what we are following now. I want to also say that this is the first time that workers will have the right to have shares in the business where they work. Right now all the shares, 100 percent is owned by the federal government. In the future you will have the workers, state government and the federal government and new investors.
This year, approximately N60 billion will be available to ensure that the urban poor and rural poor dwellers will not see significant increase in tariff. Right now actually they are all rated. The distribution companies have rated all the consumers of electricity. As at now, you have the R1, R2, and R3 for residential. Then you have C1, C2, and C3 for commercial and then you have the industrial customers’ classification. Now for those that are rated, if they are using metres, they buy metres. If not in the interim, maybe they are doing estimated billing which we want to wipe out as quickly as possible but if they are using metres, they buy credit and it is according to consumption within that area that determines the rate which they pay. So really the consumers are known and it is the implementation, we will like all of you to help us to monitor how it is going to work. What happens is that at the end of the month, the volume of power that went to R1 consumers and R2 consumers will be recorded and that is where the distribution companies get their subsidy. So the market operator only pays for power consumed. He doesn’t pay just an estimate, it’s not like somebody coming to say this month you are going to get the same bill you got last month. It is not a hidden secret; it is the amount of power sold by the power companies that will determine this.
There is a bulk metre that measures the amount of power that is transferred on per second bases to the distribution companies. The amount that went to R1 and R2 customers will now be determined by the distribution companies and that is known by the market operator. So the business may sound complex but it is actually quite simple.
 

We are discussing private power generation and distribution. Prior to this time, you were one of the champions of private power plants and you have a plant somewhere in Aba. What has happened to it?

Although you know I am now a public servant, but I keep hearing about their progress. What I heard was that by the third quarter of this year, they will be commissioned and when they are commissioned, they will become the first indigenous private owned power company to be so commissioned such a big power project, because that city will now be able to have absolute reliable electricity. We hope that other cities will begin to, through the efforts we are making, to match whatever we have. But reliable electricity will be there which is what we will like to achieve everywhere in the nation. The power that currently goes to Aba will now be redirected to other parts of the federation through the national grid.
 

Is your ministry trying to learn a lesson from what happened to Nigerian Airways and NITEL? You are inviting private investors and planning to transfer PHCN staff. Nigerian Airways and NITEL did the same thing but they did not retain them. My question is, are you not setting a booby trap for the investors? When the time comes for you to privatise, will investors accept the kind of staff you have in PHCN now and if they say they do not accept them, what happens, because this is what happened in NITEL and Nigerian Airways?

Let me say that it is a different business all together. When you look at Nigerian Airways and NITEL, we have learnt a lot from the inadequacies of the process they followed and this is why we are careful not to make such mistakes. If you decide to transfer staff just like that to a company or to a new buyer, a lot of times it wouldn’t work. That is, if you as government decide that you would force the workers on the new owners, which is why we are talking about severance when the time comes. All the workers that we transfer will be severed from the system. But severance doesn’t mean sack. It means that they are free either to decide to leave the service at that time, because their service would have been bought and the new owners might decide to retain them. It is very likely that at the beginning they will retain all of them, and begin to see how they perform. But now they are working under private sector management; they are not government managed. So this is a very different arrangement that will happen. The workers cannot really be called liabilities to the federal government or to the new owners because of this method. It is only if government is not able to pay severance that we will have that situation.
Also we are talking about institutions set up by the government to ensure that the reform works. We have the Nigerian Electricity Liability Management Company, set up to manage the liability including pension funds, so that the pension of the workers will be paid every month because the workers want to be paid for life, they don’t want to be paid out. So this is the kind of structure we have tried to put in place to see that every aspect of what would happen to the workers will be taken care of, and that the transition is clean and people are comfortable. So I do not see the similarity; we can be rest assured that the workers are going to be taken care of. The fact that they are being severed from service is what is scaring people and we understand it. But if I am a competent worker I shouldn’t have any fear whatsoever and by the way there will be abundance of business opportunities. What currently happens is that people just think that if I am working in Katampe in Abuja that is where I will work and die. In the future you don’t have to think like that. You are free to be employed here in Katampe or you can even be employed in Ibadan because you have qualification, or that you want to move to Kano or some other place.
 

You said it takes a minimum of two years to build a power plant. I can recall that since the time of the administration of the former President Olusegun Obasanjo, we have been hearing of power plants being built in this country. At a point we were told of about 14. If it takes two years to build one, how come none has been completed up till this time?

Anyway I told you that for a period that the process was stalled for two and half years; that is why the project has not been completed. I don’t want to stand for what people did in the past, but I would want to say that at least the stalling of the process for two and half years contributed to why they have not been completed. And if you look at it, what does it really mean? If you have a contract, what we call EPC contractor, that is Engineering Procurement Construction Contractor, you have an end to end contract to build a power plant and suddenly, you mobilise to site, may be you imported the equipment but there is no money released now for you to continue to do any thing, so you have to demobilise and you have to abandon most likely the equipments in various places and go, which was what happened here. So when you come back, you now have to be paid for re-mobilisation, which costs more money and you have to be paid to kind of kick start a lot of stuff and you have to be paid to test the equipment purchased before to see if they are in good condition. It was a mess! So a lot of those things had to be done by the operators of what we call National Integrated Power Project, NIPP. But many of those projects are now accelerating to completion. You have about 10 power projects or power plants of that nature and then you have transmission lines and you have distributions projects. We have hundreds of different contracts under the NIPP which is being managed by what is called the Niger Delta Power Holding Company. But truly when you start a power plant, starting a power plant means you are breaking ground. The period of design which could be about a year is not included in the two years; the conception period, the design period, the procurement period is not included. So it is really that when you have done all this and you start the construction that you have between 18 months to two years, that is what I am saying, and it takes a while.
You have to go to a site where a power plant is being built, the civil works, the mechanical, electrical, the controls, the miles and miles of wires that would have to be laid, the trenching, substations and quite a number of this. It is not a simple matter, so it is only those who are being mischievous that will say that they can build a power plant in six months or eight months. They are just being mischievous. They need to go and see what it is like. So it takes some time but in this case it took a lot longer for all kinds of reasons. But we expect that this should get better. Mr. President has done tremendous work to accelerate things. How long has he been president, between acting president and now and a lot of these plants are beginning to be completed, many of them are beginning to arrive? I would think that this year alone we should be able to commission close to four power plants. We should be expecting at least a 1,000 megawatts of power this year from various power plants.

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