In a series of meetings held with the officials of the World Bank, the Federal Government (FG), led by the Minister of Finance, has finally secured the loan meant for the development of transmission and distribution infrastructure within the Nigerian Electricity Supply Industry (NESI).
As it is not uncommon for corrupt officials to divert funds from the cause for which they have been appropriated, and because many similar loans have been collected and squandered in the past, it is important for all stakeholders to demand for the judicious use of this loan.
The $3bn loan from the world bank has a clearly defined purpose according to the finance institution.
“The World Bank has finally approved Nigeria’s request for a $3bn loan for the expansion of the transmission and distribution networks in the power sector”, it states.
Whereas the purpose of the loan is clear, the Finance Minister, Zainab Ahmed, has said the government plans to utilize it differently. The loan, according to her, would cover for funding gaps as well as shortfalls in the current tariff which investors in the sector have described as very low compared to what is obtainable in other countries.
The minister said, “This financing will cover the gap between the current tariff and the actual cost of generating electricity”.
The minister continues: “It will also enhance our ability to pay previous obligations in the sector that has crystallised so that investors in the sector can go on with expanding investments in the sector.”
This is an unfortunate development which amounts to subsidy that lines the pockets of few. The so called previous obligations are unfounded, and open to disagreement as government did not honour them previously because it could not verify them. Now, it seems there is free money. This approach looks, feels and smells like subsidy.
To do things properly, there should have been a detailed plan as to what you want to use the money for. The well detailed investment plan as contained in the Nigerian Electrification Roadmap deal with Siemens would have been a better way to utilize this loan. Instead, they want to use it to pay for the difference in tariff bogusly called a funding gap. Effectively, it will be made another round of subsidy after 213bn in 2014, 701bn in 2018, and 600bn in 2019. Those subsidies haven’t been applied in a way that improved the power sector. For a certain, we cannot subsidize our way into economic prosperity.
Spending this loan of $3bn in this manner is a pure distraction and is tantamount to ostentatious spending for claims that lack veracity. No one has been able to verify the funding gap in terms of tariff short fall.
Rather than subsidizing inefficiencies in the power sector as we have it currently, all stakeholders including civil society organisations, consumer advocacy groups, labour and trade unions, should be asking that the money be spent on the deal with Siemens for example.
No doubt, there is no love lost at the moment between FG and the DisCos going by the threat of withdrawal of licences from eight among them. Hence, there is no plan for the DisCos to benefit directly from this loan. They claim that the DisCos did not provide meters nor did they improve their network to be able to supply electricity to consumers. They haven’t also complied with customer enumeration as required by law and by NERC.
It is clear that the government is not backing down from expressing its displeasure in the way DisCos have performed in the last 5 years because they would not have a share in this loan except if the World Bank can for whatever reason give Nigeria an additional $1bn loan to increase the loan to $4bn.
According to the Finance Minister, “some portion of the loan will be for the transmission network, but if the government can expand the facility to $4bn, then the additional $1bn will be used for the distribution network. The distribution sector will be at the backend when the other reforms have been carried out. It will be a loan to the distribution companies because they are owned by the private sector”.
As it does not make sense to mortgage the future of our generations yet unborn to debts by using one loan to service another loan, the fact that the German Government was going to loan Nigeria the money for the Nigerian Electricity Roadmap deal means we need to have a rethink. Are we using one loan to finance another?
The Nigerian Electrification Roadmap project faces a critical challenge with the possible duplication of works covered in the ongoing Transmission expansion programme. TCN may want to insist on delivering their part of the project but this will not be in line with best practice as Siemens will not be able to adopt the project delivered by third party not under their direct supervision. TCN may thus try to prevent Siemens from implementing the required infrastructural development works, claiming they want to do it themselves. If they prevent Siemens from doing the needful, it means the intention of FG to evacuate the stranded 2000MW within the phase 1 of the Nigerian Electrification Roadmap deal (in the first two years of the project) will not be feasible.
As the power system is a value chain, if DisCos allow Siemens to revamp the planned sections of their networks and TCN does not allow them but corner the money, we will not be able to evacuate the so called stranded power as intentioned by the Nigerian Electrification Roadmap project.
FG needs to have a qualified project management team in place to monitor the delivery of this all important project and call to accounting anyone or group of persons that may want to scuttle the process that will lead to the successful completion of the project. If this is possible, it will do us alot of good.
As tax payers will pay back this loan, one can only hope the money wil be judiciously used for its primary objective this time around.
