Much Ado About Power

Anyone ever notice that the synonyms for ‘development’ include ‘crumbling’, ‘aging’ and ‘declining’? Ironic, because that is exactly what Nigeria is doing – forever ‘developing’ and going nowhere. As if anyone was in doubt, the country director of the World Bank in Nigeria, Mr Ono Ruhl recently confirmed that Nigeria would not achieve Vision 2020 (i.e., the mirage of being one of the twenty biggest economies in the world by 2020) unless we diversified in favour of the productive sector.

However, to be productive we need power and in the last couple of years, months, weeks the power sector has been embroiled in all manners of intrigues, probes and confusion…needless to say, no actual work is going on in the Nigerian power sector. Recently the new Minister of Power was reported as saying 6000mw of power was achievable by 2009. In the same publication, the MD of the Power Holding Company of Nigeria (PHCN) said we would not be able to achieve that much power by 2010. Now the Nigerian Electricity Regulatory Commission (NERC) is embroiled with the Economic and Financial Crimes Commission allegedly for fraud. Never a dull moment in our power sector; except in our houses powered by candles.

So what is the issue with power? In addition to freeloaders, intrigue, politics and corruption, an article in Thisday on February 16 2009 says gas shortage and financing are key issues. PHCN supposedly needs at least 1,617mmcf of gas per day from the Nigerian Gas Company (NGC), but only gets 490mmcf. If we want to increase our power production we will need even more gas. NGC blames the shortfall in supply on the oil producing companies and the lack of infrastructure. Apparently, apart from decaying and vandalised pipelines, NGC has not been able to persuade communities to act as hosts to additional pipelines – hard to believe in a country where people where bulldozed out of their homes and property in order to maintain a master plan.
Gas supplies are low for a number of reasons. First, more than 50% of the gas (associated gas because it is released as a result of the production of crude oil) that could be produced for use in Nigeria is flared. This is despite the fact that we enacted an Associated Gas Re-Injection Act as early as 1979 to prohibit flaring and ensure that oil companies either tap this gas for use or re-inject it into the earth because flaring is extremely bad for the environment. Section 3 of the Act set the deadline for flaring as January 1 1984; the latest deadline is now December 2009. Second: cash. NGC, as a subsidiary of NNPC, gets gas at a discounted price, which is not competitive especially when the oil producers can get more money in real time from the open market. When crude oil prices rise, gas prices rise too; think of the margins the oil producers would have lost if they supplied the gas to NGC. Third, the costs of implementing the Re-Injection Act are high. Shell alone, estimates that it would cost her $1.85 billion to completely stop flaring; therefore even with the fines imposed for flaring, it is still cheaper for her to keep flaring. Four: NNPC financing. We conveniently forget that NNPC is a partner to the oil producers, so if the costs associated with not flaring are high, NNPC shares in this cost as well.

Last year NNPC was allegedly only allocated a quarter of what it required for its projects – tragic considering other ministries supposedly had to return their unspent budgets. Five is security in the oil producing regions: as long as the crude oil production of Nigeria remains almost halved due to threats and attacks, gas, flared or tapped will also remain halved.
So what has all this got to do with law? Everything. We have a thirty year old law which we have not been able to implement; raising issues about the un-enforceability of laws and the role of law.

What do you do when there is a law which no one is obeying and why does the rule of law seem inapplicable here? What is the role of the law in this particular regard? Jurisprudential theory (and common sense) says you cannot force people to do things by law or by merely prohibiting. Looking at all the facts and the interrelationships between all the issues is it possible that the right incentives backed by law can halt gas flaring and produce more gas for our power turbines? Along with unattractively low electricity tariffs, another reason not to invest in power in Nigeria is the unavailability or high cost of gas. As opposed to simply and ineffectively prohibiting, the role of the law should be to set out the rules regarding gas production as well as the relationship between all the parties. Unfortunately our laws merely prescribe without going into details and our agreements are not binding, even for ourselves.

Right on cue, Thisday, February 17 2009 reported that the Federal Government has taken urgent steps in collaboration with the oil producers to provide adequate gas for power i.e., 1.2 billion cubic feet of gas (bcft) to the domestic market by the end of 2009. According to the article, ‘the President is concerned with the apparent disregard of the Domestic Gas Supply obligations approved by the government’ in April 2008 – this from the same President who casually and without backing by law extended the deadline for the gas flaring from January 2009 to December 2009.

The MD of PHCN is purportedly not entitled to a generator in his official residence, but the catch is PHCN ensures he always has light (ask those who live on his street). How can he begin to understand the abject misery in which most Nigerians live daily if he always has power? There should be a law making it illegal for the Minster of Power, the MD of PHCN and the Chairman of NERC to have power and/or a generator when the rest of the country suffers. How enforceable would that law be?

Published February 24 2009