Tinubunomics: Electricity Act 2023 as Nigeria’s Industrialization Game Changer

On the 4th of August, President Tinubu kicked off Gwagwalada Independent Power Plant, GIPP to be fired by gas and which will provide about 11% of Nigeria’s energy needs.

The 1,350 megawatts plant which is being built in three phases is being executed with funding from the Nigerian oil/gas behemoth, Nigerian National Petroleum Company Ltd, NNPC.

The first phase that is expected to be completed in three (3) years would add three hundred and fifty (350) megawatts to Nigeria’s current electricity energy inventory.

Along with two other plants in Kaduna and Kano, the GIPP is among the power projects planned along Nigeria’s 614-km (384-mile) AKK natural gas pipeline corridor, that would add 3600 megawatts to Nigeria’s generation capacity.

At the ground breaking ceremony of the GIPP, an elated president Bola Ahmed Tinubu explained what he intends to accomplish with the gas-powered plant which is coming on the heels of his assenting to the Electricity Act 2023 that is aimed at catalyzing Industrial Revolution in Nigeria.

Although our country has 12,500 -13,000 megawatts capacity,she is only able to deliver to our factories,and homes a paltry 4000 to 6000 megawatts.

That means that Nigeria has a major electricity transmission challenge which it must surmount,perhaps with a major review of the existing template that has fragmented the electricity power production and ownership into silos, consequently resulting in disintegrated rather than integrated service.

And recognizing the fact that the electricity quantity that gets to our homes are abysmally low and do not scratch the surface of what is sufficient for a population in excess of 200 million seeking to be energy independent,President Tinubu justified the GIPP project in Abuja thus:

“To accelerate our economic growth,we must remove every obstacle on our (way)to energy sufficiency.

That this project is taking off so early in the life of our administration,it should serve as a notice to the residents of Abuja and indeed all Nigerians of our determination to bring positive change to this nation”.

Before proceeding further,it is apposite that a bit of background information regarding the state of affairs in the electricity supply sub-sector in Nigeria before the advent of Electricity Act 2023, is shared for the benefit of those that are not familiar with it.

In a bid to increase private sector participation in the electricity power sub-sector,Nigerian government had authorized the establishment of Independent Power Projects,IPP that were empowered to generate electricity and sell same in the sector. It was backed by the Electricity Power Reform Act 2005 and the regulatory authority is Nigerian Electricity Regulatory Commission,NERC.

Earlier, under the watch of former president Olusegun Obasanjo in 2004,ten (10) power plants in Nigeria had been consolidated into one entity branded Nigeria Integrated Power Projects ,NIPP.

And the Niger Delta Power Holding Company ltd ,NDPHC was subsequently set up and it became the vehicle with the mandate to manage the ten (10) NIPP assets.

These are:(1) Geregu in Olorunsogo in Ogun state (2)Geregu ll in Kogi stat(3)Gbarain in Bayelsa state(4)Ihonor in Edo state(5)Alaoji in Abia stat(6)Omoku in Rivers state(7)Egbema in lmo state (8)Sapele in Delta state (9)Omotosho in Ondo state and (10) Calabar in Cross Rivers state.

That is with respect to the generation of electricity,GenCos whose source of generating power is a mixture of hydro and gas.

Along side the GenCos (11) Electricity Distribution Companies,DisCos were also licensed across the country in 2013 to distribute the electricity power generated to the last mile: factories,offices and homes nationwide.

Of the 11 DisCos five (5) are currently under receivership because they have been declared distressed and therefore taken over by the line regulatory agency, NERC and the Bureau for Public Enterprises,BPE which is holding federal government’s equity in the firms after they were privatized in 2013. Only three (3) of the six(6) that are not under receivership are very solvent. These are Ikeja DisCo, Eko DisCo and Abuja DisCo.

As we may recall, the DisCos are being operated in partnership with government that hived off some equity which got sold to the private investors operating as DisCos.

BPE is charged with the responsibility of looking after governments interests in the DisCos.

Unknown to most Nigerians,the electricity power sector is actually also being subsidized by government in the manner that pump price of petrol was being subsidized by the federal government.

In the case of subsidy in electricity sub-sector, it is only to the tune of an estimated N1.3 trillion naira.

Although the subsidy is far less than what is applied to bring down the price of petrol pump price , nevertheless electricity is still being subsidized.

Is that not surprising?

In any case, it is that subsidy that could have been removed via the proposed increase in electricity tariff that would have commenced in July, but which has been suspended till further notice owing to the temporary hardships wrought on Nigerian masses by petrol subsidy removal.

Also , it is important to point out that paucity of funding has been an issue in the electricity sub-sector. It is not so much so with GenCos,but especially with DisCos . Hence most DisCos are indirectly owned by banks to whom they are highly leveraged or exposed to via hefty loan facilities.

With respect to the GenCos, the Ughelli power plant acquired by Transcorp Power has broken-even, and therefore has been released from oversight by BPE.

We will get back to that later.

But first of all,let us put into an array the unfolding boost in electricity supply which has been triggered by the reforms in the sector following the passage of the Electricity Act 2023 by president Tinubu last June and which is part of the Tinubunomics package.

One of the electricity Distribution Companies,DisCo, Eko Electricity Distribution Company, EKDC which is one of the five (5) that is not in distress,but doing well and under the chairmanship of Mr Oritsedere Otubu,covering Lagos Island and the environ; has moved swiftly to harness the opportunity immediately after signing into law of Electricity Act 2023 by President Tinubu.

By leveraging first mover advantage,on Tuesday 11 July,which is barely one month after the inauguration of Asiwaju Bola Tinubu as president of Nigeria on May 29 ushering in Tinubunomics,EKEDC broke the ground for an embedded electricity generation facility of up to 30 megawatts capacity in partnership with lagos state government and Elektron Energy at the cost of $50m.

According to the promoters of the lndependent Power Project branded Victoria Island Power Project Ltd,when completed and commissioned is envisaged to provide uninterrupted electricity power supply to its coverage area which is basically lagos and Victoria island and adjourning lkoyi and Lekki axis.

With the space freed up for investments by entrepreneurs ,more participants would be engaging in the transmission aspect of which the federal government had retained monopoly.

The private sector participants would remove the clog as transmission it has been the weakest point in the value chain.

To get a good grasp of the sordid situation in the electricity subsector, let us keep in mind that until 2013, only the federal government was allowed by law to play in the sector.

So, before the sub-sector was unbundled in 2005 with private investors given some equity and control of the power assets resulting in a slight boost in power supply, not even the 36 state governments were allowed to play in the sector.

Even after the sub-sector was liberalized in 2005, it was still difficult for some players to participate in it as illustrated by the anecdote of an operator of an IPP in Lekki, Lagos state that got caught up in a web of regulatory entanglements arising from splitting investments into the sub-sector into three (3) silos or investment packages.

The narrative is that the project had been set up as an embedded power plant to provide electricity for power an estate in the Lekki axis. It also had the lagos state government as an off-taker for the lighting up of the major streets from Victoria island to Lekki in Lagos.

While the IPP was willing to off load its excess capacity into the Eko DisCo grid, it could not do so owing to regulatory bottle necks that had not been removed even after the 2005 and 2013 reforms.

Evidently,due to the myriads of regulatory constraints that the framework threw up, potential electricity power that is highly needed in our homes , offices and factories have remained stranded.

Hopefully,such systemic policy impediments in the electricity power sub-sector that had been constraining our country from experiencing the highly desired industrialization that would have enabled her transit from a developing to an emerging economy, have been addressed by the electricity Act 2023 have addressed.

Apart from the reality that lack of access to foreign exchange,FX has been a major disincentive for major industrial concerns like Michelin, Proctor and Gamble , Berec Batteries and other consumer goods manufacturing firms to continue to operate in Nigeria , hence they have been relocating to neighboring countries like Ghana ,the lack of stable supply of electricity to power their plants has also been a major factor for their shutting down their operations in Nigeria.

But with the Electricity Act 2023 in place, the businesses that had taken flight from

Nigeria are expected to return to harness the benefits that the huge opportunity inherent in doing business in a country with a population in excess of two hundred million people, offers.

Even local entrepreneurs are also positioning to take advantage of the Electricity Act 2023 which is an intrinsic part of Tinunomics.

A billionaire,Mr Femi Otedola,who is the owner of Geregu Power, according to media reports is also already in talks with Lagos State government capitalizing on Private Public Partnership ,PPP investment model for the provision of electricity in lagos state which is the economic hub of Nigeria.

Furthermore,as part of the ramping up of activities in the electricity power sector, facilitated by the Electricity Act 2023, the world bank president,Mr Ajay Banga had recently paid an official visit to Nigeria to support our country with expertise and knowledge gained by the bank from experience in many other markets.

The world bank which has extended soft loan facilities and grants to private sector investors in the power plants (GenCos and DisCos),reckons that 85 million Nigerians lack access to electricity and the number would jump to 94 million by year 2030, if action is not taken to close up the gap.

That perhaps justifies the World Bank chief’s plan “to assist in funding the construction of 1,000 mini solar power grids in partnership with Nigerian government and the private sector”

The Bretton Woods institution has

particularly been very active in Nigeria through its investments in rural electricity supply value chain by providing funding for the Rural Electricity Agency, REA which is a federal government agency that has the mandate to provide energy to grass root markets that may not be attractive to GenCos and DisCos.

Following in the footsteps of EKEDC and the proposed initiative of Geregu Power geared towards harnessing the benefits inherent in the Electricity Act 2023, it was anticipated that other DisCos and Generating Companies,GenCos would also be doing their spade work preparatory to making further investments in their electricity generation and distribution ventures in Nigeria.

That is because they have been major players by virtue of having taken major stakes in the sector following the privatization of some of the public utilities by the federal government from 2005 -2013.

Therefore ,it was not surprising that Mr Tony Elumelu led Transcorp Group through a consortium of other investors has bought over 60% of Abuja Electricity Distribution Company,AEDC with the aim of boosting electricity energy in the federal capital territory, Abuja and environ.

Prior to the signing into law of the Electricity Act 2023 that has triggered the current race to produce electricity independently,Dangote Refinery and Petrochemical company in Lekki Free Trade Zone in Lagos had become a proof of concept with its green field power generating facility having twelve thousand (12,00) megawatts capacity.

Those familiar with the industry believe that Dangote power plant set up to power the mega industrial project has an output capacity of twelve thousand (12,000) megawatts that is just 500 megawatts lower than the (12,500-13,000) megawatts generation capacity of the entire country.

Experts contend that half of that capacity is enough to power the industrial complex, with extra capacity left to cover significant parts of Ogun and Lagos states.

But going by regulations surrounding the generation,transmission distribution, before the Electricity Act 2023,it would have been very difficult for Dangote group to avail Ogun and Lagos residents of the excess electricity power generated in their plant. The Electricity Act 2023 is poised to enable collaboration to happen in the Sub-sector between operators and even the possibilities of one- stop -shop with a single operator generating,transmitting and distributing to eliminate frictions currently plaguing the sub-sector.

The above are some of the reasons that the Electricity Act 2023 is deemed as a game changer for industrialization and an elixir being driven by Tinubunomics as the new paradigm shift for governance in our beleaguered country.

While,Dangote group constructed their 12,000 megawatts power plant to power their petrochemical industrial complex in Lekki, Lagos, an entrepreneur and educationist, Dr Adedeji Adeleke who is the owner and pro chancellor of Adeleke University, located in Ajebandele in Ondo state had also reportedly according online reports invested $2b in the establishment of a 1,250 megawatts plant.

But the project was stalled due to vandalization and theft of critical components of the plant by the villagers that had been hired to protect the very expensive components of the plant.

Dr Adeleke reportedly broke the news to the 9th set of students of the university in an address thus:

“last month, we discovered that some of the turbines have been broken into, some of the components were yanked off in each of the turbines.These are heavy items that will require at least ten people to lift a single one. This means that somebody would have brought in a truck at night to carry those things away” Then stated that:

“The project will be delayed for another year to get those things they looted back”.

Now,although l have been able to independently fact check the claim,my take away from the narrative above and the reason that it is being cited is that Dr Adeleke’s effort represents another private sector initiative aimed at boosting electricity power supply since the sector was liberalized 2005/2013.

So, clearly the desire to invest in boosting power supply is not the issue in Nigeria, but our peculiar challenge of insecurity has also created a major set back in addition to a complicated regulatory framework.

Furthermore ,the point being made with the instances of private sector investments in the production of electricity cited above is that the appetite by the private sector for investments in the electricity power sub-sector has always been high as reflected by the plethora of potential and actual investors in the sub-sector.

But private sector potentials had remained unharnessed due to lack of vision by past leaders that failed to envision the capacity of the private sector to turn around the ugly situation of epileptic power supply that had been hindering our country from developing socially and economically.

Plainly speaking,the federal government has been the main culprit that had kept our country in perpetual darkness and probably the reason Africa as a whole is derogatorily referred to as a dark continent. That is simply because it has continued to centralize electricity power provision in the manner that centralization is entrenched in communist countries. The fixation had become entrenched,despite the fact that centralization is a governance template that has been discarded even in the epicenter of communism /socialism,China and Russia.

Regarding private sector participation in electricity power production, it is worth underscoring the fact that if we add Dangote’s Lekki Lagos 12,000 megawatts to the work- in-progress Adeleke’s 1250 megawatts,the one inGwagwalada near Abuja which is 1,350 megawatts as well as Eko DisCo in Lagos Island that would be producing 30 megawatts, there would be a total of roughly 15,000 megawatts from green field plants available in Nigeria in a mere five years span of time.

The truth is that from my finding,Nigeria would not have been having electricity power challenges that had hobbled the economy over the past number of years, if the sector had not been ringed fenced against private sector participants.

That is because were it not for the restriction of investments in that sector to only the federal government which is a policy that has been in place since the formation of our country,there could have been many private sector players investing heavily in the sub-sector,as has been the case with banking, telecommunications and sundry sectors that opened up for the participation of local and foreign entrepreneurs. The situation ie even more appalling since it has long been established that the private sector is a more effective and efficient operator of public utilities.

If the Geometric/Aba Power Plant promoted by Prof.Bath Nnaji,a world renown electricity expert in Abia state, in the south-east Nigeria currently providing steady electricity to the only indigenous automobile assembly plant Innosson Motors Ltd, and the Azura Edo Power Plant,a thermal power fired facility which is another private sector effort with a production capacity of 1,500 megawatts,(but currently producing 461 megawatts in the first phase) based in Benin city ,Edo State, south-south Nigeria also powering a cement factory in that zone, are thrown into the mix of the stock of electricity energy available in Nigeria ,then it would be clear that our country may be on the verge of overcoming the perennial electricity power supply shortages which had scuppered industrialization in Africa’s biggest economy.

Although Azura Power Plant,floated through private capital from Actis-a United Kingdom,Uk based venture capital firm and an American institutional investor, has had it easy, Geometric Power, an indigenous venture has been in the making for nearly a decade owing to administrative bottlenecks and funding constraints before it eventually took off last year.

Apart from the less than optimal operating framework, amongst the stumbling blocks on the path of independent electricity power producers in Nigeria,is the Transmission Company of Nigeria,TCN which is the sole electricity power transmission firm in Nigeria.

That is because although about 13,000 megawatts is produced nationally, less than half is distributed to end users simply because of poor transmission infrastructure ,stemming from the fact that the private sector had been barred from participating in that aspect of the value chain. Otherwise the dilapidated infrastructure could have been replaced as has been the case with the power plants and are being revamped by the new private sector owners.

It is disappointing that by the time that the generation and distribution aspects of the old Power Holding Company, PHCN were unbundled in 2013 via privatization,the federal government retained the transmission aspect of the public utility company.

It is such half hearted and half measure approach to reforms of not totally freeing up the sector for private investors full participation,that has constrained the sector from blossoming in the manner that other services hitherto under the exclusive purview of government such as banking and telecommunications etc have witnessed a boom after being sold to entrepreneurs.

That is why if you ask any investor in the electricity sector ,what has been their biggest stumbling block stopping them from rapid progress,they would all identify TCN as the main culprit for the slow pace in the evolution of the power sector.

Arising from the above it is expected that the monopoly and clog in the wheel of progress in the electricity sub-sector posed by TCN has been eliminated by the Electricity Act 2023 that is a key enabler of Tinubunomics.

Apart from the retrogressive policies that forbid private investors from generating electricity that has also prevented multiple potential investors from venturing into the business as evidenced by some housing estate owners who could have independently produced electricity to serve their needs and inject the excess into the national grid,a cursory look has revealed that the TCN remains the government agency that needs to be unbundles as it has been an obstacle as opposed to being an enabler for effective electricity power delivery in Nigeria.

That is not surprising because more often that not,the personalities that manage Ministries, Departments,Agencies, MDAs in our country who are regulators acting on behalf of government had been wired to be a thorn in the flesh of private sector operators.

That happens when government agencies adopt the attitude of us versus them,instead of the ideal approach of being partners in progress for the greater good of our country.

That unproductive mindset of our public servants needs to be changed.

To be fair , past governments had tried to address that dichotomy between public servants and private sector practitioners via Ease of Doing Business in Nigeria policy pursued by the immediate past administration under the vice president’s office. A measure of success was recorded but obviously a lot still needs to be done.

And Geometric/Aba Power Plant is believed to have been the worst victim of TCN’s shenanigans garbed in bureaucracy.

In several claims made in the public space,the operators of the plant have accused TCN of disconnecting her from the national grid,ostensibly for not meeting payment obligations arising from disruptions due to COVID-19 pandemic and insecurity in the eastern region without subjecting other operators to similar standards.

That TCN is able to ride roughshod with other players is only possible due to its monopolistic role as the sole electricity transmission company.

It is my hope that new investors would make forays into the transmission aspect of electricity power production,having been empowered by Electricity Act 2023 to so do.

I am convinced that the concept of keeping the transmission aspect out of the privatization loop was ill advised and wrong headed. As such it needs to be revisited.

So also is the policy of separating the three critical processes of producing electricity: generating,transmitting and distributing into distinctive entities,which is faulty and dysfunctional.

As such,it would need to be rejigged for more effective and efficient service delivery through the reduction or avoidance of friction between GenCos and DisCos on one hand,then DisCos,GenCos and TCN on another hand,not to talk providers of embedded electricity services that are also having difficulties with GenCos and DisCos on another level.

A situation whereby the three aspects of electricity power delivery are owned and operated by multiple companies handling different aspects ,has not augured well for the very critical electricity sub-sector that has the capacity to catalyze industrialization.

My finding is that a single company can operate seamlessly in the entire value chain of services with ease and deliver more efficiently and effectively.

And we have seen such a system operated in other climes.

Even locally,the small operator of an embedded power plant in Lekki lagos for instance generates,transmits and distributes electricity to homes in estates covering about 25 miles in housing estates with ease. So,why can a single firm not serve a particular zone by operating all the value chain of generating, transmitting and distributing electricity power?

The sub-sector is currently witnessing a flurry of activities via realignment of investments reflected by the fact that GenCos are cross-investing in DisCos as reflected by EKEDC investment in the establishment of an embedded power plant in partnership with Lagos state government in Lagos.

Similarly, Transcorp power which is a GenCo operator is also leading a consortium of investors to acquire 60% of Abuja DisCo.

With the competition that is ensuing in that space (a powerful attribute of private sector engagement in services hitherto monopolized by government) more value would be added in the electricity sector in the manner that value was added in the banking and telecommunications sectors, when private investors were allowed to play in the spaces.

And the good news is that consumers would be the greatest beneficiary, if improved service delivery is achieved in the electricity sub-sector of our economy.

Given the current shambolic state of affairs in the electricity power sector which has huge potentials as highlighted in this piece,the new minister, Mr Adedayo Adelabu that would be in charge of the ministry of power,has his job cut out for him . And it is to catalyze the latent productiveness that is highly needed in Nigerian economy for it to optimize the enormous potentials of our country.

It is not rocket science to figure out that the electricity power sub-sector which is a critical component of Tinubunomics,if well organized would enable Nigeria be an economy that is open for business twenty four hours,seven days a week (24/7).

That is a phenomenon that would make the Gross Domestic Product,GDP of Nigerian economy which is currently estimated to be roughly $440 million naira,leap to at least one billion dollars economy.

The justification for the optimism expressed above is derived from the reality that the productivity of our country’s workforce which is currently stymied due to unreliable and unsteady public electricity power supply,would be doubled if owing to regular power supply for 24/7, businesses can operate both day and night.

That is a situation which is currently impossible simply because businesses are shut down by 6pm and only get restarted by 6am the next day.

It is in the context of the above positive outlook that Tinubunomics which is driven by Electricity Act 2023, promises to be a game changer for the much-sought industrialization of Nigeria.