Ever since President Yar’Adua complained that $10 billion had been spent on the power sector between 2000 and 2007 without commensurate result, the nation has been awash with stories of scams and shocking revelations. What is the state of the power projects today? What went wrong along the line? Who is lying and who is telling the truth on the amount of money that was spent? Why is Nigeria still in darkness despite all measures applied since 1999? What is the way out? THISDAY investigates and reports
Power to the People?

What Obasanjo Met…
When Chief Olusegun Obasanjo assumed office as President on May 29, 1999, the power sector – represented by generation, transmission and distribution – was on the verge of collapse. The nation was constantly in darkness. The National Electric Power Authority (NEPA) had its acronym reinterpreted: Never Expect Power Always. Even the feeble attempt to make it look like a publicly owned company, with the change of name to National Electric Power Plc (NEP Plc) only gave more mischievous ammunition to the public who defined the new acronym as “Never Expect Power, Please Light Candle”.
The entire economy ran on generating sets as NEPA could only muster 1,500MW, out of a projected need of 4,000MW, for transmission and distribution across the country. The diagnosis was that epileptic supply was a product of the dilapidation of the power infrastructure in the country. The generating stations were not being serviced; transmission lines were routinely vandalised; and the distribution transformers were worn out without replacement of parts or service. NEPA itself was in a sorry state as corruption was the order of the day. The accumulation of these inefficiencies brought a height to the decay and periodic system failures that had variously thrown the entire country in darkness.
Obasanjo inherited four thermal stations: Egbin, Ughelli, Sapele and Afam. There were also three hydro electric stations at Kainji, Jebba and Shiroro. Whereas the installed capacity was 3,500MW, production had shrunk to as low as 1,500MW. Out of the 78 generating units in the country then, only 28 were generating electricity and feeding a paltry 1500MW into the nation’s economy.
Hope raised and dashed…Obasanjo, having lamented the rot, set out to address the problems. He started on a wrong footing, many would say, by appointing a seasoned lawyer and politician, Chief Bola Ige, as Minister of Power and Steel, rather than a technocrat who would have understood the terrain better because of the technical nature of the sector. Ige promptly promised that by the end of 2002, Nigerians would experience uninterrupted power supply, a promise he was forced to retract when he was confronted with the enormity of the problem later on. Obasanjo would later say in 2007, more than six years after the assassination of Ige, that the former minister “did not know his left from his right”.
But when Obasanjo set out to address the problem in 1999, he had the objective of turning NEPA around within the first six months. Generation increased same year, obviously not as a result of his ingenuity but because of the rainy season which had improved power generation at the hydro stations. In March 2000, he set up a Technical Board for NEPA with Senator Liyel Imoke as chairman. Obasanjo released funds for the importation of spare parts and new transformers for the reactivation and rehabilitation of generating, transmitting and distribution infrastructure. The Federal Government was said to have spent $1.3 billion (N1.319 billion) for the supply, installation and commissioning of additional materials and spare parts for the completion of major rehabilitation work for NEPA’s 330Kv and 132Kv circuit breaker at major power stations located at Afam, Sapele, Kainji, Egbin, Ikorodu, Akangba and Jebba.
Total generation rose to 3000MW by December 2000 and 4000Mw by the end of December 2001. In generation, the reactivated Afam, Delta 11 and the injection of the AES-Enron Independent Power Project into the Egbin unit had brought 276MW, 150MW and 270MW respectively into the national grid. The Abuja Emergency Power Project and the Agip IPP at Kwale (Delta State) also imputed 150MW and 450MW respectively to the power pool. To achieve the set target, the government embarked on rehabilitation of another set of 20 generating units at the various power stations to bring additional 1,500MW of electricity into the system.
In the area of transmission, government awarded 26 contracts for the re-enforcement of existing lines and substations and another 30 contracts for the construction of new lines, which increased the transmission capacity by 2000MVA, while in distribution, the Federal Government installed 1000 power and distribution transformers, which brought another 420MVA of electricity at 33Kv. Additional 4000 distribution transformers were also delivered. This was expected to increase distribution capacity by another 1600MVA.
The Imoke-led Technical Board focused mainly on generation through rehabilitation of old units and by the time its assignment was over in December 2001, Obasanjo was setting new targets for the power sector: 10,000MW by the year 2005. There was considerable debate then on what the government should do: privatise NEPA or keep funding it? This was a major decision to be taken on the future of the utility. If the decision was for privatisation, it meant government had to stop pumping funds into NEPA; if the decision was to continue funding, there was the perennial issue of government inefficient management of utilities in Nigeria.
While the debate was on, and a decision was finally taken to privatise, there began a phased withdrawal of government funding. NEPA began to run its activities with an increased drive for commercially generated revenue. The marketing staff were given targets to meet – a situation that developed into complaints about “crazy bills” from consumers nationwide. In the meantime, works had virtually stopped on the rehabilitation of older units at the power stations as the power sector reform bill – designed to liberalise the sector – lay untouched at the National Assembly.
Gradually, with reduced funding and a reliance of the old turbines, the power situation continued to decline and the nation was thrown into darkness again.
The Enron-AES Controversy
But for the bitter rivalry between the then governor of Lagos, Senator Bola Ahmed Tinubu, and Obasanjo, an idea that could have improved the power situation and provided a sustainable improvement in the sector would have been devised as far back as 1999. Tinubu had conceived the idea of emergency power through the importation of barges from Enron Corporation in the US. About 270MW was to be generated from this. The original idea was to sell to industrial areas in Lagos, especially Ikeja and Ilupeju. Agreements on commercially viable tariffs had been reached with the industries concerned.
There remained just one problem: while Enron would generate the electricity, it had to evacuate for transmission. The transmission lines belong to NEPA. The co-operation of the Federal Government was needed to get NEPA to transmit to the industrial areas. Meanwhile, Lagos State had already been committed to a guarantee which meant N220 million would be deducted at source from the state’s share of monthly federal allocation (it is still being deducted till today). Obasanjo was said to have been prevailed upon by some PDP members that the project was “fraudulent”, so this presented initial hiccups. Eventually, Obasanjo was persuaded and he encouraged Lagos to import additional barges. But the situation on ground today is that the barges, which are now being run by AES, generate electricity for the rest of Nigeria as Federal Government has taken it over. The initial agreement that the electricity would be sold to industrial areas of the state was jettisoned as a result. However, up till today, the power generated by EAS is part of the output of Egbin. Indeed, AES, Geregu and Egin have the same source of gas which is rationed because of gas shortage.
Enter the NIPP
With Independent Power Plants (IPPs) being built around the country by state governments and multinational companies, generation capacity was in theory going up, although at a slow pace and with no significant improvement in power supply partly because of gas shortage and partly because of transmission and distribution hitches. The decision of the Federal Government to liberalise the sector was understood to mean there would be no more government investment in it.
However, Obasanjo was said to have come up with the idea of a “significant investment” in power generation, transmission and distribution in the country sometime in 2004. The National Integrated Power Project (NIPP) was born. It was originally conceived as the Niger Delta Power Project with seven medium-sized plants, before it took on a “national” nature in 2005. This was expected to be funded by the three tiers of government – Federal, State and Local – from the excess crude oil revenue account.
The Federal Government’s projects in Niger Delta under the NIPP are the Omoku Thermal Power Station, Rivers State, Gbaran/Ubie Thermal Power Station, Bayelsa State, Sapele Thermal Power Station, Delta State, Ikot Abasi Thermal Power Station, Akwa Ibom State, Ihovbor Thermal Power Station, Edo State, Egbema Thermal Power Station, Imo State and Calabar Thermal Power Station, Cross River State.
It was designed as a “fast track programme to deliver new capacity”, in the words of the then Minister of Power and Steel, Senator Liyel Imoke, who is now Governor of Cross River. There are 102 transmission line projects under the project to strengthen the transmission and to complete our transmission grid. About 22,000 transformers are expected to be installed in the system to strengthen distribution.
According to the Federal Government then, the sites for the project were chosen because of nearness to gas supply. The country does not have a gas grid yet. Siting the projects in far-flung places would require additional funds to lay gas pipelines as well as increase the risk of vandalisation, the government explained.
As originally conceived in 2005, the total cost of NIPP was N322 billion. The project subsequently expanded in scope to its present configuration costing N1.210 trillion. Some N361 billion has been already been spent or otherwise committed in irrevocable letters of credit for instance. The cost of the six power stations (including all project management, consultancy, compensation expenses) is put at under US$750,000 per MW.
NIPP’s many controversies and failings…
The project has faced many controversies from the first day. The source of the funds – excess crude account – did not go down well with many governors and councils who believe they would like to choose how they wished to spend their money. However, this initial disagreement was eventually resolved and all the states and councils decided to participate in the project.
Another problem was the Engineering, Procurement and Construction contracts that were awarded by the government of Obasanjo late 2005 and 2006. Revelations and allegations from the current House of Representatives’ probe of the project have thrown up a number of things. One, work has not been completed on many of the project sites. Two, many consultants have not been to project sites despite receiving some payments. Three, some contractors were paid above the agreed contract sums.
However, there are also political problems that were identified. A section of the country was said to have complained to President Umaru Musa Yar’Adua that all the projects are located in a particular part of the country and the local content of the contracts were also awarded to the exclusion of some parts of Nigeria.
But the President seemed interested in only one thing: auditing the project before deciding on the way forward. Immediately he assumed power, he stopped funding the project because he believed drawing from excess crude account was “illegal” and would violate his vow to pilot the affairs of Nigeria based on the rule of law and due process. His decision meant no kobo has been released to the contractors since May 29, 2007. Many contractors became restless and threatened to abandon work on the sites.
It would seem the entire story took a new turn in January when the President held a meeting with General Electric and a delegation of the World Bank, led by Dr. Oby Ezekwesili, former minister in Obasanjo’s cabinet. Yar’Adua lamented that in spite of the $10bn spent in the sector, there is no commensurate effect in power supply. The statement kicked off the verbal tug-of-war, which has now engulfed the country like wild fire.
Ezekwesili, otherwise called “Madam Due Process”, first tried to put the records straight by putting the figure at less than $5bn. Obasanjo’s Special Assistant on Power Sector, Folusheke Shomolu, who retained the position under Yar’Adua, bit the bullet by attempting to correct what he thought to be a mathematical anomaly in the figure that the power sector gulped during Obasanjo’s tenure.
He started by writing to Tanimu Yakubu Kurfi, Yar’Adua’s Economic Adviser, pointing out what he believed was the correct figure and offering to make himself available to clear the air in case the presidency needed clarification. But sources in the Villa disclosed to THISDAY that Tanimu felt piqued by the suggestion and instead stoked fire in the whole affair, which began as an honest effort to return the matter back on track. But Yakubu took Shomolu’s effort with a pinch of salt and even hinted that Shomolu was only trying to contradict the president. As a result, the former president’s aide was summarily relieved of his position.
The controversy surrounding the figure still remains unresolved, in spite of the interest that the sector has generated in the public domain. Some put the figure at $10 billion, as claimed by Yar’Adua. Others are more comfortable with the $16 billion touted by Bankole. The figure that Ezekwesili mentioned also has its adherents just as many others hold firmly to the $13.28 billion being suggested by the House Committee on Power, which it stated was the total expenditure on the power sector during former President Olusegun Obasanjo’s eight-year tenure.
What next?
The revelations coming from the House probe will probably lead to greater accountability as Yar’Adua strives to establish a culture of transparency in his government, but it will not generate more megawatts for the country. The contractors have been defending themselves. Those who were accused to have collected money without anything on site to show for it have attributed this to two main reasons: red tape at the ports which means equipment are tied down (Imoke told THISDAY last week that 21 gas turbines are idling away at the Onne, Warri and Calabar ports partly because of this); also, some of the contractors claim that government has not paid compensations to some of the communities hosting the sites, thereby making it difficult for construction contracts to be carried out even if engineering and procurement aspects have been executed. Those who were said to have been overpaid also claim that there was provision for variation of sums on their contracts because of “unforeseen” circumstances.
While the probe is expected to address the issues of accountability, the other vital aspect about lighting up the nation is back to the front burner. What bothers the populace is, at the moment, is how to get out of the current darkness. The financial commitment by the government, especially the previous one, is far detached from this objective. For example, South Africa, a country of 47 million people generates 40000MW of electricity but it now experiences intermittent interruptions of power supply. Compare that to Nigeria, which has a conservatively estimated population of 150 million people with growing power needs but with only 6000MW being promised against next year.
Power Stations: The Report Card
The three hydro-dams at Kainji, Jebba and Shiroro and four thermal power stations at Egbin, Afam, Sapele and Ughelli, all with a total installed capacity of 6,000 megawatts, could hardly generate 2,000 megawatts. At present, all the stations are operating at 30 per cent installed capacity. The generation capacity of Egbin Station inaugurated in 1985 with the generation capacity of 1,320mw and Delta Power Station, which was raised from 72mw installed capacity in 1966 to 918mw in 1990, has dropped drastically. The Afam Power Plant operated for only two years and has since not been functioning. Apart from low generation, inadequate distribution facilities, vandalisation, transmission bottleneck and a highly corrupt and ineffective system were other identified problems.
Recently, the Power Holding Company of Nigeria (PHCN) confirmed a steady decline in gas supply from the Nigerian Gas Company (NGC) to Egbin and Geregu power stations due to the build-up of condensate in Escravos gas pipeline. The power company said sequel to the non-availability of adequate gas to power the plants, power generation at the Egbin Power station has reduced from 800MW to only 100MW with a daily shortfall of 150MW at the Geregu Power Station.

•Omotosho Thermal Power Station,
Ondo State (335MW)
The Omotosho Thermal Power Station was one of the four new power generating plants which were planned as a medium term strategy by the Olusegun Obasanjo administration in an effort to boost the nation's electricity generating capacity, following the long years of neglect suffered by the power sector over the past decade. The plant was inaugurated in April 2006 by Obasanjo and was expected to add about 335 megawatts to the national grid. The plant was built at a cost of $170million and the scope of the project included the construction of a transmission line to link with the existing transmission line from Benin to Ikeja West in Lagos , as well as the construction of a one and a half breaker system switchyard complete with control room.
Issues/Problems
The plant was to be linked directly by pipeline with the Nigerian Gas Company (NGC) outlets in the creeks of the Niger Delta. The project is connected to the existing Ikeja-West/Benin transmission line through which generated power will be evacuated. The connection of the plant to the transmission line had been completed since June last year, but only two of the eight turbines are said be functional due to inadequate supply of gas to the station.
•Papalanto Thermal Power Station,
Ogun State (335MW)
The plant was inaugurated by Obasanjo at the twilight of his regime to add 335MW of electricity to the national grid. Though it was gathered that the turbine gas station has not been connected to the national grid because of lack of gas supply but officers at the plant refused to comment on when the multi-million naira project inaugurated will become operational. The contract included the construction of high-tension transmission lines from Ikeja in Lagos to Papalanto. It was learnt that the plant is being constructed with the counterpart fund of N13billion [approximately $104,562,673] by the Federal Government while the Chinese Exim Bank is contributing N27billion. The gas power station has a total capacity of 335 mw and has eight gas turbine units. The two units were expected to produce 84,000 kw annually and the rest six units are expected to generate electricity in the coming months.

Issues/Problems
Construction work is still ongoing and the turbine gas station has not been connected to the national grid because of lack of gas supply. So the plant currently is not generating power.

•Geregu Thermal Power Station (Kogi State 414mw)
The plant was also inaugurated in 2006 by Obasanjo to add about 414MW of power to the national grid. The turnkey contract for the facility was awarded to Siemens. There is a gas supply line to the facility and a second one was being planned. Like the other gas turbines, the plant has not been functioning at full capacity due to lack of gas supply.
•Alaoji Power Station (1074MW)
Alaoji Power Station, expected to generate 1074 MW of electricity, is one of the projects being handled by Rockson Engineering Limited. The company has procured all the equipment for the project, including the four gas turbines and has completed about 95 per cent of work at the project site. The turbines and other equipment, that arrived the country since 2006 are still lying fallow at the Onne Port, Port Harcourt, due to problem of movement of the heavy duty equipment and documentation problems respectively.

Issues/Problems
Progress on the project has been delayed by failure of the Federal Ministries of Transport and Works to grant the contractor’s request since over 18 months to transport the turbines and generators over Imo River Bridge . The Change Order to construct a ramp with jetty to by-pass the bridge is yet to be approved. This by-pass of Imo Bridge is important for the actualisation of the project.

National Integrated Power Project
The Federal Government’s projects in Niger Delta under the NIPP are the Omoku Thermal Power Station, Rivers State, Gbaran/Ubie Thermal Power Station, Bayelsa State, Sapele Thermal Power Station, Delta State, Ikot Abasi Thermal Power Station, Akwa Ibom State, Ihovbor Thermal Power Station, Edo State, Egbema Thermal Power Station, Imo State and Calabar Thermal Power Station, Cross River State. The various NIPPs have been fraught with challenges as well as infrastructure and funding issues.

•Ihovbor Power Station, Benin, Edo State
Investigations show that the project is only about 25 per cent completed owing to some set backs, which include funding issue.

•Calabar Power Station, Cross River State
The boreholes dug on site reportedly yielded no water even as the Pipeline Construction and the contractor reportedly wound up its Nigeria operations. The contractor was said to have abandoned the project since about eight months ago.

•Sapele Power Station, Delta State
The project was said to be only 30 per cent complete as soil investigations revealed that the original site for the power station was unsuitable to support the turbines. Also, the Joint Venture Agreement between members of the construction consortium has been reportedly terminated.

•The Egbema Power Station, Imo State
The project is one of the NIPPs being handled by Rockson Engineering. The contract was signed on March 16, 2006 and the effective date was September 23, 2006, while the completion date is 2009. The contractor has carried out most of the construction works. Gas turbines no 2 and 3, foundation pilling and concrete block comprising foundation far gas turbine, generator and auxiliary skids have been completed. Also water treatment shelter and maintenance workshop foundation piling has been completed, while installation of test piles, pile load test, sub-soil investigation and report is said to be 100 per cent. Most of the engineering and procurement works, including detailed engineering for gas turbine foundation block have equally been completed.

Issues/Problems
Delay in payment of contract down payment has adversely affected the progress of the project. Also Letter of Credit established is said not to be in conformity with the contract terms. Withdrawal of partners due to kidnapping in the Niger Delta, as well as outstanding port charges, reimbursement of port charges and terminal handling fees totalling $956,940.41 and N86,312,160.27 yet to be paid have hindered the project’s progress.

•Gbaran/Ubie Power Station, Yenagoa, Bayelsa State
This is also being handled by Rockson Engineering Limited. Although the contract was signed on March 16, 2006, the contract commenced on September 26, 2006 and completion date is 2009. Most of the engineering, procurement and construction (EPC) works have been done. For example, sand dredging and hydraulic filling of power plant are said to be 100 per cent (850,000 cubic meters). The originally quantity of sand to be delivered on the contract is 754,000 cubic meters. The transmission line project is said to be on. Detailed engineering work and design was said to have been completed, while most of the equipment have been procured.

Issues/problems
Delay in payment of contract down payment reportedly delayed the project for over six months. Disturbance by the host community and the kidnappings in the Niger Delta region, which led to the withdrawal of Rockson’s technical partners, also adversely affected the project. Another major problem was said to be that the Letter of Credit established was not in conformity with the contract terms, resulting in further delays.

•Omoku Power Station
This is also being handled by Rockson Engineering Limited. The contract is not yet effective as receipt of advance payment is yet to be fully paid. The completion date however is 2009. Notwithstanding the payment issues, the contractor was said to have carried out most EPC works. Installation of test piles, pile load test and sub-soil investigation and report is said to be 100 per cent complete, while soil laterite fill and perimeter fencing of power plant are said to be in progress. Also, most of the detailed engineering works and design are said to have been carried out, while contracts have been awarded for transformers and other equipment. Power house shelter manufacturing and shipment is said to be 100 per cent but the consignment is at present awaiting clearing at the Onne Port, Port Harcourt.

Issues and Problems
Manufacturing of main gas turbine equipment by General Electric has been suspended due to non availability of Letter of Credit. There is also reported delay due to power plant relocation. The LC is invalid after 24 months. Other problems included acquisition of the right of way for the main access road to the power plant and the kidnapping in the Niger Delta region.
Station Capacity
Egbin Thermal Power Station, Lagos State 1320MW
Afam Thermal Power Station, River State 969.6MW
Sapele Thermal Power Station, Delta State 1,020MW
Delta Thermal Power Station, Delta State 912MW
Ijora Thermal Power Station, Lagos State 40MW
Kainji Hydro Power Station, Niger State 760MW
Jebba Hydro Power Station, Niger State 578.4MW
Shiroro Hydro Power Station, Niger State 600MW
Can Yar’Adua Finally Break the Gridlock?
Barring any more hitches, the government of President Umaru Musa Yar’Adua could be set to make good the vision of providing Nigerians with regular power supply. The Presidential Committee on Accelerated Expansion of Electricity Infrastructure appears to have had everything wrapped up in its Action Plan which was submitted to the President and adopted by the Federal Executive Council (FEC) last week.
The committee said 1450 additional megawatts could be realised from existing PHCN plants, 3368 megawatts from ongoing National Integrated Power Project (NIPP), 640 megawatts from the Shell Petroleum Development Company’s (SPDC) Afam/Okoloma Joint Venture and 805 megawatts from Legacy Independent Power Projects.
So, the challenge now is not whether there is no blueprint to work with, but whether the President will have the political will to see through the recommendations, which indeed, do appear to hold a lot of promise. The Action Plan not only takes cognizance of the shortcomings of the experiment of the previous administration, it has put forward what could be seen as concrete steps that will see to the actualisation of the dream.
What’s more, to drive this design is a crop of go-getters who have performed outstandingly in their respective turfs in the private sector.
Among them are Executive Director of Exxon Mobil Group of Companies, Mr. Cyril Odu; President/CEO of African Finance Corporation, Mr. Austine Ometoruwa; CEO of Sahara Energy Ltd, Mr. Kola Adesina; Group Managing Director of Wempco, Mr. Lewis Tung; and Managing Director of Marylead & Co., Engr. Jacob Alade. Others are Alhaji Aliko Dangote and Atedo Peterside, Chairman of Stanbic IBTC Bank Plc.
The remaining members of the committee chaired by the Minister of State for Energy, Power, Mrs Fatima Balaraba Ibrahim, are the Group Managing Director of NNPC, Engr. Abubakar Lawal Yar’Adua, his GED, Exploration & Production, Mr. Chris Ogiemwonyi; Chief Economic Adviser to the President, Mr. Tanimu Yakubu; Executive Director, Operations of Nigerian Gas Company, Engr. Saidu Mohammed; and Dr. Ransome Owan, CEO of Nigerian Electricity Regulatory Commission (NERC).
This team has placed its finger on the major issues working against the smooth operation of the power sector. As has been the case for some time, the Committee agreed on the need for Public Private Partnership, and says it has designed a PPP structure that would “immediately deliver target power supply”.
In the short term, it has identified mixed power generation of 6,500 megawatts in 18 months for a sum of $2.8 billion and an additional 10,000 megawatts for $5.5 billion by 2011. That means in three short years from now, Nigeria’s power out put would be 16,500 megawatts. To be sure that power generated is transmitted and distributed, there are plans to conclude transmission and distribution upgrades.
Using an energy mix that de-emphasises dependence on gas, the plan envisions the diversification to the development of greenfield Low Pour Fuel Oil (otherwise known as black oil), coal and hydro generation by the private sector.
To get to this level, the Africa Finance Corporation (AFC)/Aliko Dangote-led technical team had reviewed the situation with PHCN, NNPC, NGC, NIPP, private IPPs, international oil companies (IOCs) which have been mandated to provide a certain percentage of gas for the purposed fuelling of the power plants, one of the major problems being encountered now. It has also consulted CBN, McKinsey, China Exim/Sino Sure, US Exim, law firms local and foreign banks with preliminary finance plan concluded. Further, it has reviewed bankable tariff and payment system and recommended a direct subsidy programme.
However, one of the major setbacks to the realisation of adequate supply, the low tariff regime which discourages private investors from venturing into generation, transmission and distribution, has been tackled headlong with a recommendation of the acceleration of action on the multi-year tariff order (MYTO) and Power Consumer Assistance Fund and wants a staggered tariff payment structure that allows the rich to pay more to subsidise the amounts paid by the low income earners.
The committee wants the Electricity Power Sector Reform Act 2005 to be implemented. It also calls for the liabilities of PHCN to be determined and negotiated. It urges that, thereafter, a 10-year bond via capital markets be raised to settle liabilities.
These are besides the implementation of four enabling conditions – bankable Gas Special Purchase Agreements (GSPAs), securitisation of revenue assurance of medium term, pricing and central coordination of funds. It was also recommended that existing legislation against theft of power, power equipment and vandalisation of power equipment be enforced while power and gas host communities should be provided electricity. This means there would be less discontent and therefore less tendency toward vandalisation of facilities.
Other very important recommendations of the committee are that the Federal Government must uphold the sanctity of contracts entered into by it and stability and transparency in the enforcement of government policies, actions which should not be difficult for a regime such as the present one which has as fulcrum the rule of law and due process.
Noting that the 5 to 7-year tax holiday and 30 per cent tax reduction were not enough incentives to attract the kind of private participation required, the committee suggested the following: Fast-track clearance of imported items and accelerated clearance for imported power equipent; introduction of tax holidays for up to ten years to allow firms to recoup their initial investment. This, it said, should be done through duty waivers for power, gas and coal mining.
Perhaps one of the most effective ways of ensuring proper implementation and supervision of the energy projects is the committee’s request that the Federal Government “approve private sector structured financing with international management oversight of financial asset while Federal Government of Nigeria retains ownership”. This is vital considering that as at now, it is difficult to trust the government to independently oversee the administration of the power projects if they are to achieve the desired result, what with the proven inability to do so.
Considering the likely international financiers such as African Finance Corporation with Prof. Chukwuma Soludo as chairman of the board, backed by other top notch bankers and businessmen such as Tony Elumelu, MD of UBA; Jim Ovia, MD of Zenith Bank; Aliko Dangote; Erastus Akingbola of Intercontinental Bank and Cecilia Ibru of Oceanic Bank, this looks workable.
Of course, one of the immediate fears being expressed in some quarters is whether or not, with the likes of Dangote who was part of the consortium that was to buy the Kaduna and Port Harcourt refineries for “peanuts” deeply involved in the project, Nigerians could trust them not to sell choice public properties in the power sector to themselves. That is a fear that cannot be swept aside with a wave of the hand.
How Much was Actually Spent?
President Umaru Musa Yar’Adua fired his Senior Special Assistant on Power Sector Reform and Co-ordinator of National Integrated Power Project (NIPP), Mr. Foluseke Somolu, in February over what was understood to be a reaction to Somolu’s stand on the reported $10 billion “wasted” by the Olusegun Obasanjo government on the power sector. Somolu, who also served the previous government in a similar capacity, had written a memo to the Chief Economic Adviser to the President, Dr. Tanimu Yakubu, in which he disputed the $10 billion figure stated by Yar’Adua as the amount spent on power sector between 2000 and 2007 without “achieving much results”.
The memo, which Somolu copied to the Chief of Staff, Minister of State for Energy (Power), Special Adviser to the President (Power), Co-ordinator, PHCN Liaison Unit and Managing Director NDPHC, was dated January 14, 2008. Somolu had argued that the total amount released to NEPA/PHCN during the period was US$2.2 billion, while a total of US$2.96 billion was released to the NIPP, bringing the total to US$5.16 billion – which tallied with the figure given by Mrs Oby Ezekwesili, a former minister in Obasanjo’s cabinet.
Somolu, in the memo, said his intention was to draw Yakubu’s attention to “this glaring error in figures” and suggested that “wider consultations be made before figures of sensitive nature are released”. However, the controversy generated by Somolu’s response was said to have led to his sack via a letter dated February 13, 2008 from the office of the Secretary to the Government of the Federation. Somolu is a former member of the NEPA Technical Board and a former president of the Nigeria Society of Engineers.
Reproduced below is the text of Somolu’s letter, with reference number SSAP/PSR/NIPP/200.00/378, to the Chief Economic Adviser entitled: “Inaccurate Figure of Expenditure on the Nigeria Power Sector”.
“Please recall that on Monday 14th January, 2008 Mr. President received a delegation from GE [General Electric] and you made a presentation. On page 7 of that presentation titled: ‘Market Opportunity and Recent Activity’ (copy attached) you indicated that 10billion USD has been spent since 2000 in the power sector but only limited improvement was achieved.
“As a member of the NEPA Technical Board (2000-2001), and having been closely associated with the power sector almost on a continuous basis since then, the figures that are available to me do not approximate anywhere near 10billion USD. Attachment ‘A’ to this letter, a tabulation of all funds released to NEPA/PHCH from 2000 to August 2007 indicates only N268.9b (=2.2b USD). Attachment ‘B’ tabulating all monies released to the National Integrated Power Project (NIPP) shows a total of N360.7b (=2.96b USD). The total of A and B is N629.6b (=5.16b USD at an exchange rate of N122 to one USD).
“From the above expenditure, the technical board raised the available and functioning generation capacity of NEPA from under 2,000MW in 1999/2000 to over 4,000MW by December, 2001. This included the brand new power station Afam, V, 276MW and complete replacement of 12 turbine units (units 3-14) at the Delta Power Station, total capacity 300MW. All of these are still functioning and contributing power and energy into the national grid, limited only by gas shortage. It also includes the brand new Omotosho, Papalanto, and Geregu power stations, partly paid for under the National Integrated Power Project (NIPP) and partly from FGN funding to NEPA/PHCN.
“Under the National Integrated Power Project, all the projects are works in progress including all the transmission lines and distribution expansions so their effects could not be felt now. But all the turbines, at least 18 are within the country already. Some power station constructions are in progress because letters of credit for various sums which are part of the above expenditure have been established.
“Against the above background, the caption in your presentation to GE delegation, ‘$10 billion spent since 2000 but only limited improvement in power supply’ is obviously misleading.
“My intention here is to draw your attention to this glaring error in figures so as not to embarrass government when it gets to the public domain and journalists start quoting it as true position of events. May I therefore suggest that wider consultations be made before figures of sensitive nature are released.
“However, if you require additional information or further clarifications in respect of the figures, please feel free to contact me.
“Please accept the assurances of my best wishes.”
So, what’s the actual figure?
The President had, while receiving a delegation from the World Bank led by Ezekwesili in January, said: "The $10 billion invested in the sector between 2000 and 2007 has not translated into power generation, transmission, and distribution…so we are exercising caution to ensure that any further funds to the sector would translate into production and delivery of energy to the ordinary Nigerian… More dollars will not provide light, unless we find a project management solution."
Ezekwesili put the figure at around $5 billion. The Speaker of the House of Representatives, Hon. Dimeji Bankole, estimated it at $16 billion. The House Committee on Power and Steel put it as $13.28 billion. At a stage, some members of the House of Representatives said it was $23 billion. The Minister of State for Energy (Power), Mrs Fatima Balaraba Ibrahim, said while $16 billion was actually appropriated, only $10 billion was released.
Everyone may be correct, depending on what parameter is being used. The President spoke about $10 billion being “invested” from 2000 to 2007 – which does not mean everything came from the coffers of the Federal Government; Bankole spoke about “budgetary allocations between 1999 and 2007” – which might not all have been released in any case; Shomolu spoke about actual spending by the Federal Government on rehabilitating NEPA stations as well as funds released for NIPP all between 2000 and 2007 – which probably did not take into account overhead costs.
A former minister told THISDAY: “I see that the effort to hold on to the line that $10 billion plus was spent has meant adding the over $4 billion of NEPA’s (later PHCN's) eight-year recurrent/operating costs of personnel salaries and pension liabilities and other such administrative costs financed directly from the revenue generation of the agency. Also determined to work to the sum, oil multi-nationals’ sole commercial investment of over $1 billion in the power sector through their IPPs is being passed off as Federal Government spending/investment in power! Why mislead the public?”
It would seem the real truth is being lost to propaganda.
Until Projects are Completed, We Won’t See Results, Says Imoke

Former Minister of Power and Steel and Governor of Cross River State, Senator Liyel Imoke, who also served as chairman of the Technical Board from March 2000 to December 2001, fields questions from THISDAY Board of Editors on the burning issues in the power sector

What is the National Integrated Power Project (NIPP) all about? The National Integrated Power Project was designed to address the new challenges of the power sector. The reality of the power sector is that we had not paid any attention to expanding our power infrastructure as a nation. In my tenure as the chairman of the NEPA technical board from March 2000 to December 2001, we were asked to rehabilitate the old units in the existing power plants to deliver 4,000 megawatts. In fact, when that was achieved we understood it to be a temporary solution. While we rehabilitated old units and brought them back on stream the older units that were not rehabilitated were equally due for overhaul maintenance and inevitably were all going to break down if they were not attended to. After my tenure at the technical board, there was considerable debate on the privatisation of the utility, whether we could achieve privatisation within the shortest possible time. And I think that argument held sway for some time. Unfortunately, the Electric Power Sector Reform Bill was held up in the National Assembly and it was not until, I believe, 2005 that the bill was facilitated because of privatisation and was passed.
In the interim, the rehabilitation work that had been completed in 2001 and the 4,000 megawatts being achieved could not obviously be sustained for another five years without new investment. So, the NIPP was actually designed as the first investment in new capacity in our country in over 15 years and it was supposed to have been implemented on a fast track basis. The thinking at that time was simple. Try and do some gas power plants, which are the quickest to realise. Put them as close to the source of gas as possible so that you don’t have long gas pipeline to construct and also you don’t have the risk of vandalisation of the long gas pipelines. So, the idea was on a fast track basis, let’s construct these new power stations that will add for the first time new capacity to our grid. If you estimate that, our economy may have grown by an average of five per cent yearly between 1999 and 2008. If you do five per cent in each year for over eight years, it means your economy has grown by about 40 per cent and you have no new capacity. The only new generation capacity we had in the country was what was coming from Shell [Afam] and from Agip [Kwale], because we didn’t and we still don’t have the right regulatory framework for the private sector to come and we still need to invest in this new generation capacity.
So, the NIPP was designed as a fast track programme to deliver new capacity. A lot of people think that the NIPP is just six or seven power stations. There are 102 transmission line projects under the NIPP to strengthen the transmission and to complete our transmission grid. That is to create a loop so that we can have reliable delivery of our electricity and our distribution components was designed to have 22,000 transformers installed in the system to strengthen distribution. The NIPP at that time in terms of projects, was probably, I don’t know what it is now, the largest ongoing project in the world. That also provided us with an opportunity to standardize some of our equipment to be able to begin to think commercially. As you know, the assumption was that the power sector reform programme would also progress. And as such, if you build these power stations, were you going to hand them over to an unbundled group? Which power station in National Electric Power Authority (NEPA) or Power Holding Company of Nigeria (PHCN) was now supposed to be a business unit under the reform programme?
Each station under the NIPP was supposed to be concessioned but was never designed to be handed back to the utility to manage or to equip. Upon completion it was supposed to be concessioned and the holding company that was set up, the Niger Delta Power Holding Company, would hold the assets until they are concessioned. We were trying to think ahead rather than having an NIPP or the station filled and no managers because of the either privatisation or concessioning or unbundling of the utility. The holding company was set up with the Minister of Finance at that time as the chairman of the board of the NIPP. And because excess crude funds were applied, the three tiers of government were supposed to have representation on the board. That is governors, the local government chairmen and, of course, the Federal Government. That was the structure of the holding company and in proportion to their contributions based on the revenue sharing formula. That was the programme we were pursuing until I left office [in 2006].
What was the level of the projects by the time you left office?
Most of the contracts were awarded after I had left office.
How would you now explain what is on the ground, especially with recent revelations emerging from the House probe of the power sector that money was paid to contractors and nothing was done?
I don’t think it is possible. Which is the point I have been trying to make all this while. The contract is awarded to a company. There is a complete process. There is due process at every stage from the beginning of each project at a time. Contractors are shortlisted, bids are evaluated, technical bids are evaluated, financial bids are evaluated and the whole process is sent to the due process office. Every NIPP project is certified by the due process office. Payments are based on advance payment guarantee and performance bonds. If a contractor gets his 25 per cent advance payment, that advance payment is retired over the life of the contract and the bond is in place. Now, for him to get anything above the 25 per cent advance payment, we must have reached a project milestone as defined in the agreement. And I dare say that the NIPP contracts are probably some of the best contracts that any government agency in Nigeria had entered into. It will be good if we look at those contracts.
So, if a contractor reaches a milestone, receives the payment, there has to be one question that should be asked. There are consultants who have to vet. There is a project team which has to certify, and also the contractor. So, unless all three of them conspired you know what I mean… It doesn’t come back to the minister to certify the next stage of payment. Those are technical things. So, if he gets a milestone payment without reaching the milestone then there are questions to be answered and that needs to be made clear. Certainly, letters of credits are in place and those letters of credits are high security documents. You cannot just go and steal letters of credits. The terms may say that upon presentation of shipping documents you now draw. So, if the person could draw without presentation of shipping documents, then even the bankers whether it is HSBC or JP Morgan, whoever it is, you hold them. You understand the reality. So, it is okay for one to go to a site and say eh! This place has not progressed but it is necessary to sit down and look at what stage they are in each contract.
Like I said, I don’t hold brief for any contractor. I left a year and a half ago. Certainly, that is why I said if there is any contractor that has failed to perform, for Christ’s sake, go after the contractor. The project was a fast track project. Every contractor was made aware of this. So, if they have actually failed to perform then somebody has to be held responsible. There must be a reason. As you know, some of the projects have not been funded [by the government] for nearly a year. That could have stalled the progress. That should not be lost on us. So, we have some little challenges. A man has received one to three billion naira but the villagers have not been paid compensations of N30 million. There is no more funding for NIPP so that compensation of N30 million, which the villagers have not been paid, prevents the contractor from going to site. As it is, he cannot progress. I don’t know if you had tried to build a foundation for transmission line in a community in the Niger Delta that has not received its compensation. You are not going to do it. So, you have a N30 million problem spoiling a N10 billion project. That is the truth.
But who had the responsibility of handling the community relations aspects of the contracts? Is it the Federal Government?
It is the government. When I was in office, I wrote to every governor where the project was located. I wrote to every local government chairman where the project was located, to inform them about the project and to request their support with community relations. In the NIPP, there is a community relations unit whose job is to just handle compensation. So, the only problem with the NIPP was that NIPP is not budget item. You cannot say there is a N4 billion set aside for NIPP and then plough from that money. As invoices were prepaid, they were sent to finance ministry and they paid from the excess crude account. It was not as if something was set aside from the excess crude account for NIPP. Once you stopped doing that, it means that little things like compensation, maybe demurrage for goods at the ports, and what have you, are not handled and the project is not realised because of that.
But isn’t that a case of putting the cart before the horse?
No, no… you do it as you move to site. What happens is that in one or two instances you do the compensation long before the contractor moved to site, by the time the contractor moves to site, he sees houses on the routes. Not houses, just foundations block work all along the routes and everybody starts claiming compensation, even though those houses were not there before! So, you start another process of claims. It was only when the contractor was ready to move to site that you now went to pay the compensation. And like I said, compensation was paid for all the power stations. Compensation was paid for all projects that had kicked off when I was there. Like I said, I am not holding brief for any contractor but I think we should be objective.
There are two stages of due process. One is to award a contract then the other one is to pay. The former Finance Minister, Dr. Ngozi Okonjo-Iweala, said all you did was to come and show waiver approvals from the president. Why did you decide not to allow the project to go through the normal processes? Why did you show the waivers only?
Opening a letter of credit for an international commercial transaction payments is based on the defined milestones, internationally defined language. So, HSBC understands. Due process certification is not a requirement for that type of payment. Due process certification for payment is not recognised as a document to be presented for payment and because they are based on project milestones you find that in a contract life, the contractor may have 15 or 20 milestones. So, he goes to draw 15 or 20 times to get certifications for payment. When you have the advance payment guarantees, you have provided the things that would be looked at for certifications of payment. The APG and the bonds are in place. Normally, if you went through due process it will take any where from one to four months to get certification. You want to implement this project on a fast track basis, you are dealing with international companies and the issue of certification for payment becomes a challenge. But even then the due process office issued in their report. It is clearly in their report. They said that the project, after evaluation, is good for certification for award and payment. It is important that we understand this because the impression being created, is yes, some allocations were paid on trust… there was no due process. Which is most unfortunate because I don’t think there was any procurement exercise that was more thorough than the NIPP procurements and you can check. They are verifiable. The facts are there.
Why did you draw from the excess crude account instead of a supplementary budget?
The power problem affects everybody. It is not just a Federal Government problem. It also affects states and local governments. Everybody suffers from that challenge. So why can’t we collectively address it? And there was a meeting of the National Economic Council that was convened where the matter was presented that we should use the excess crude to address power. We had these excess crude funds all the time either kept in the reserve or not utilised and we had this challenge of addressing the new capacity for power. So there was a meeting of the National Economic Council where it was approved that a committee was set up. That committee was then chaired by the Vice-President and it had the governors of the Niger Delta states where the power stations were located as members and one governor from each of the geo-political zones as member. It had representation from the local government chairmen.
The thinking was that to apply the excess crude, the Federal Government on its own cannot appropriate the excess crude that belongs to the states and local governments. You can’t go to the National Assembly and request to spend state money and local government money. So it was necessary to bring them on board and to get their approval. That was the thinking because the truth of the matter is that if you do not put in what is supposed to go into the sector, you are not going to get anything out of it.
And if you want to finance it through the regular budget, you are looking at, may be, hundreds of billions. And the Federal Government thought, in terms of the reserve, what accrues to it alone… could it cover the entire project? That was the challenge. So that was the thinking at that time; that let’s use this excess crude. We all have it and we have a common problem. We all suffer from power problems.
Can you tell us how long it takes to complete an average power plant?
The average time to complete a gas power station is about three years.
So how come that the ones you started since 2004 could not be completed in 2007?
They didn’t start in 2004. Most of them started in 2006. We are probing a project in the middle of its execution, even when funding has been stopped for nearly one year.
Why didn’t the Federal Government factor in compensation to host communities when it was awarding the contracts?
You can’t factor in compensation because compensation is not paid by the contractors. There is a provision for compensation in the yearly budget of government; a line item for compensation. I think it is around two or three billion naira. The utilities are aware that they have to pay compensation. But the compensation is not defined. It is not a fixed rate. There might be economic trees, houses, a number of things that may have to be destroyed. So you can’t determine what the value of compensation is until you conduct what they call, I think, a waybill exercise. So there is a provision for it in the budget. Like I said, we paid compensation.
You paid compensation?
Oh yes, if not the power station sites would not have been acquired. What I’m saying is that compensation may be a problem in some of the sites. Now, what you do is simple. There is no funding for NIPP as you know. Hopefully, today, the Federal Executive Council may approve the new proposal on funding. The new 6000 megawatts that is supposed to be realised from the new initiative, where is it coming from? Of course, from NIPP (laughs). This is the first time I am seeing private sector about to throw money into a “useless project”.
Are you satisfied or embarrassed that such a colossal amount has been spent and we are still where we are or even worse?
I’m certainly not embarrassed (laughs). Surprised, may be. I don’t understand why I should be embarrassed. Should I be embarrassed at a project that has not been completed? I left a year and a half ago as a minister.
You said you did not award most of the contracts. In other words, you awarded some of them. The ones that you awarded while you were there, what is the progress report on them?
That is not for me. How can I answer your question? Are they my personal project?
But some of them are two-year projects with, perhaps, only one year left to go by the time you left the place. That means you are in a position to give account?
They have stopped funding it now.
To the extent that it was funded, what is on ground for you to see?
Let me ask you a question. You want to build a house, your quantity surveyor says the cost of this house is N10 million. You put in N8 million. You do foundation up, and you stop funding it at N8 million, so there is no roof and you want to live in the house and you said that you have spent so much and there is nothing to show (laughs). There is something unique about power. If you are constructing a road from say Lagos to Ibadan, if you put in eight out of ten million, you would have achieved the road being tarred and graded and people can begin to manage it. In the case of electricity, it is useless until that project gets to Ibadan and is connected to the grid. That is power for you, no short cut until the project is fully completed.
What is your response to the allegation that the power project was embarked upon without factoring in the issue of gas supply?
Only a mad man can start building a power station without consideration of gas. The NIPP team included NNPC and the Nigerian Gas Company. They had a gas supply plan in which NNPC was involved. Unfortunately, at that time, the Ministry of Power and Steel was not the Ministry of Energy. The gas delivery plan was purely a function of NNPC and the NGC. Clearly, there was a gas delivery programme given to us by the NNPC on when gas would be delivered to the power stations. There is a gas delivery plan. There is nobody that will start building a power station without taking all that into consideration. The challenge was that the oil companies had committed the gas to the LNG. And so they could not give us gas for domestic use. Secondly, the gas was not appropriately priced. So it was more profitable for them to export the gas than to give it to us for the power plants. In fact at one time, the former president had to threaten them, that he would not grant them any other approval if they did not deliver gas to our power plants. So that was the challenge.
And it was based on that that they had to sit down with NNPC and agree on a plan for gas delivery. Whether NNPC has kept to that programme, I can’t say. But I don’t think that it is reasonable that anybody can plan a power station without gas. Let’s say you commissioned a 400 megawatts station, all the gas may not be delivered on the day you commissioned all the plants. So you have those challenges. So we have three power stations that are completed, Papalanto, Omotosho and Geregu, but they don’t have gas. That is not the only case. Egbin power station was commissioned in 1985 but gas did not get there until 1987. We have to address the problems.
Doesn’t that boil down to the same argument that there was no proper gas plan for these plants?
No, no, no. Let us set the record straight. The fact is that if you take Geregu for instance, it is connected to gas. The only problem is that the source of gas is the same as Egbin. So for you to run Egbin, you have to shut down Geregu and vice versa. We still have to come back to the oil companies. If we don’t shout at the right people, the challenges will remain. But let us first identify the problems so that we can address them sensibly. At that time, my job was to ensure that Geregu is completed on schedule. It is there. It is not wasted money.
As at the time you left office, how much had been spent on NIPP?
The commitment was about $2 billion on NIPP.
What about other utilities under the ministry such as NEPA?
NEPA received budgetary allocations and that is very easy to establish.
How would you respond to the claim that the Obasanjo administration did not know what to do with power issue until probably three years before the end