 Power and telecommunications |
Reducing the cost of doing business in Nigeria requires a total overhaul of the insfrastructural base of the economy. Electricity and telecommunication are the two major infrastructure items that operators in the economy complain most about. Creating an enabling environment for competition between private operators within the power and telecommunication markets may be the solution if associated with the aid of appropriate policy,
legislative support and government incentives.
Electricity and telecommunication are the fulcrum of Nigerian's current privatisation programme. In February the Vice President who is head of the privatisation council appointed a committee headed by the minister of power to prepare the electricity parastatal National Electric Power Authority, NEPA, for privatisation within 18 months. Similarly he appointed another committee head by the communication parastatal Nigerian Telecommunications Plc, NITEL, for privatisation within six months. These moves strike observes as indication that the government is irrevocably resolved to crack the hardest nuts of the privatisation programme. New chief executives for NEPA and NITEL have since been appointed by the Obasanjo government.
Chief Bola Ige, the minister for power and steel has made privatisation central to his agenda for the power sector. According to him, the state of the electricity sector in Nigeria by June 1999 showed gross inefficiency and ill-maintained system resulting in epileptic and erratic power supply. Deterioration of facilities resulted in a dismal output level of 1,600 Mega watt out of installed capacity of 6,000 MW. Electricity coverage extended to only 30% of the population giving a per capita consumption of less than 60KW hour per head. Sale of retail power entailed government subsidy of up to 170% while losses in revenue was up to US$10million per month.
Against this bleak background, the minister outlined an immediate action plan to revamp the power sector. Following approval of the existing system and structure, he has set targets for 6-12 and 24-month periods to drastically reduce and eventually eradicate power outages. To improve quality of service and quantity of power generated, he is refurbishing the existing installations and feeding temporary supplies to the national grid. These were the core of sundry palliative measures the minister has taken which are yet to bear tangible fruit. In the face of relentless public clamour for improvement, the minister is banking on his restructuring plan for the power sector. The steps will include decentralising NEPA into its elemental components of generation, transmission and distribution. NEPA will be broken into separate companies on each of the above areas. These descendants of NEPA will be companies quoted on the stock exchange and will be systematically privatised with the government divesting sufficiently to allow significant private sector control.
The minister stated that the power sector will be deregulated with local and foreign investors being encouraged to participate in all sub-sectors of power . He stated that private initiatives including independent power producers, IPPs, will be encouraged to increase the opportunities for power generation, transmission and distribution. An enabling environment for competition will be created in the power market with the aid of appropriate policy, legislative support and government incentives.
Prices of retail and wholesale power will be driven by market forces. Envisaging what he called a free power market, the minister says the goal of the administration is to provide electricity to all Nigerians for domestic or industrial purposes in an open and free market environment. To achieve this, the quality and quantity of electricity will be assured by the participation of the private sector while an independent regulatory body maintains equity for all concerned as well as national security.
The main features of the envisaged free power market include a complete shift of ownership from public to private sector. It will be a transparent framework which removes all legal barriers in the power market and guarantees competition. There will be guidelines for power purchase agreement and licences for IPPs to ensure smooth operations. With private initiatives, total power generated should increase to 25,000 MW by 2010. "A host of foreign investors from all parts of the world and local investors have submitted proposals to participate in the emerging competitive power market in Nigeria"; chief Ige says. |
Analysts have long viewed the Nigerian power sector as a gold mine. Hundreds of companies have made enormous profit selling the ubiquitous generating plants that have been the saving grace for meeting industrial and household power requirements. Nigeria's electricity monopoly has the habit of regularly asking for billions of dollars from the government to put its facilities in order. The country is now counting on a competitive market structure to draw in billions of dollars in private investment that will provide electricity which chief Ige calls "an essential infrastructure and the life-blood of national development and industrial growth"
Telecommunication rivals electricity as a vital infrastructure for industrial growth. The government considers both to be so critical for its privatisation programme that it has applied to the International Development Association for credit to pay consultants to do an in-depth legal/ regulatory reform studies on electric power and telecommunications. Privatisation is seen by President Obasanjo as the best way to eliminate the lack of transparency that prevailed so far in those two sectors. The Nigerian Communications Commission, NCC, says it is in touch with foreign investors willing to bring in US$8.05 billion dollars into the communications sector if the right environment is created. There have been calls by operators in the sector for a review of the new Telecom policy.
The effort is on to modernise and expand the existing network. The thrust of government policy is to facilitate private sector participation and fair competition. Emphasis is being laid on the development of national standards through an intensive process of equipment-type testing facility. Standardisation of equipment meant for use in the country is intended to create a viable and attractive market with a view to lowering the cost of locally-manufactured telecoms equipment. The government is also encouraging the development of internet service provision.
The stakeholders question the exclusive priviledge given to NITEL. Other missing links in the telecom policy, they pointed out, relate to the problems of interconnectivity, Very Small Aperture Terminal (VSAT) and Global System of Mobile Communications (GSM). Constraint of interconnection with NITEL presents the greatest obstacle to the development of the telecommunications sector in the country. NITEL's posture negates the current policy of deregulation and liberalisation. It is difficult to justify the a license fee of US$ 100 million for GSM mobile cellular operators. The unrealistic fee will be transmitted to subscribers in the form of high tariffs thereby pitting telephone services outside the reach of majority of Nigerians.
The government should address the issue of interconnectivity urgently and license additional national carriers in the spirit of economic deregulation and liberalisation. Advancement in communications technology makes existing regulations on v-sat and international gateways irrelevant.
The cost of international calls in Nigeria is one of the highest in the world and the consequences for the economy has been adverse. In order to promote investment in the industry, the pioneer industry status should be extended to new investors in the sector and duty on telecommunications equipment reduced.
Operators feel that NITEL is stifling the growth of the sector. It has only 400,000 active lines for a country with a population of 100 million. They see it as too poorly managed to respond imaginatively to new technologies. Still NITEL is competing with private operators for GSM license. NITEL says as a national carrier, it should offer all telecom services. NITEL says it does not have enough capacity to interconnect all the private telecom operators licensed by NCC. NITEL has been criticised by Nigerian legislators as an octopus wishing to have everything and creating no room for others. As the restructuring of the telecom industry proceeds not many in the industry were perturbed when early in the new year the government fired the chief executive of NITEL for irreconcilable differences and suspended the head of NCC for violating protocol by taking his complaints to the legislature rather than to his supervising ministry.
The privatisation and deregulation policies of the government entails the emergence of at least a second national carrier. Until then, all the private telecom operators depend on NITEL network and they are not finding it pleasant.
The transport sector is another crucial area of infrastructure provision that suffers considerable bottlenecks. But of all the 10 parastatals under the ministry of transport, none is included in the current privatisation schedule. Some are training institutes while those offering commercial services are decidedly non-profit oriented. The National Shipping line has long ceased to function.
The Nigerian Ports Authority, NPA, oversees Nigeria's eight port facilities excluding oil terminals. It has a cargo handling capacity of 35 million tonnes per annum. Since 1992, NPA's operations have been run on a commercial basis though it remains 100 per cent government-owned. |
