POWER PLAY

Nigeria 2018 | ENERGY | INTERVIEW

TBY talks to Babatunde Raji Fashola, Minister of Power, Works, and Housing, on the ongoing initiatives to increase power generation and distribution across the country and the need for distribution companies to provide reliable power.

Babatunde Raji Fashola
BIOGRAPHY
Prior to his appointment as Minister of Power, Works, and Housing in November 2015, Babatunde Raji Fashola served two terms as governor of Lagos State from 2007-2015. As a Senior Advocate of Nigeria, Nigeria’s highest legal distinction, he is also the recipient of the Stephen J Solarz Award of the International Crisis Group in 2015 for his commitment to improving social and economic conditions in Lagos, particularly for his role in the response to the Ebola outbreak. Fashola was the chairman of the Strategy Committee of the All Progressives Congress and served as chairman of the fundraising committee for the Buhari-Osinbajo campaign.

How would you assess the current power supply situation in Nigeria, and what are your plans to increase power generation and distribution?

If we compare how much African countries have spent on power over the last two decades compared to western countries, Asia, and the Middle East, we can see the investment and therefore the results gap. Our energy issues have not defied solution; they have simply not received the kind of attention and investment that is needed. We have had decades of inaction while our population continued to grow. Now, we are ramping up our response and the speed at which we are procuring more power is consistent with our roadmap to get incrementally more energy, steady growth, and later to upgrade our power. In terms of incremental energy, we have increased production of power from 2,690MW when this government was inaugurated to 6,900-7,000MW today. In November 2017, we secured another 115MW from Gbarain and in December 2017 another 240MW went on-stream. In March 2018, 240MW will come in and by July 2018 another 40MW should be added. There are close to an additional 2,000MW coming in over the next three to 15 months in terms of production. At the same time, Nigeria's national grid is expanding. We currently have around 33 transmission projects, many of which we will conclude between 4Q2017 and YE2018. Distribution projects are also being completed. This is a dynamic and evolving process, and Nigeria's transmission capacity is now close to our generation capacity. The real area of challenge now is the distribution side, because Nigeria's power generation capacity has outstripped its distribution capacity. We need to intervene and ramp up our distribution capacity. We are collecting data about where peak power needs to go from each of the distribution companies, where collection losses are lowest, and where there are more customers willing to pay. Then, we will plan the rollout of distribution equipment and funding.

What is your response to investors' claims that electricity tariffs do not match the cost of investment?

That is one argument; another is that consumers are paying more than the tariff through their own self-generation, sometimes two or three times more. The question is what investors can do to get consumers to trust them with that money, and the answer is provide the service. Electricity providers have to meter because consumers are ready to self-generate power. If they provide the service, then they will get more money and consumers want to see what they are paying for so they have to meter them. Another argument is the assumption that the tariff and unit costs will not guarantee recovery. Again, this argument is flawed because we only collect from disclosed consumers. Every distribution company must improve its means of auditing and censoring all the people consuming energy within its business area. They need to develop a consumer database. They are operating based on the consumer numbers given to them at the time of privatization, which is about 7 million consumers for the whole of Nigeria, which cannot be right. If they keep the same tariffs but improve the collection base, their income doubles. The solution lies in collecting more from more consumers who are not currently paying for their electricity. In any event, ultimately the Federal Ministry of Power, Works, and Housing does not decide or approve the tariffs; that is not our job. There is a regulator with a statutory duty, and the ministry does not stand in its way. Our responsibility is not just to help businesses, but maintain the balance for consumers as well. Indeed, businesses ultimately exist because of consumers. It is difficult to store power and not as easy to control as other commodities where if the price is increased the commodity is still there. Once people receive a better service, their resistance to paying drops.