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News & Press Releases

Beyond Power Probe Report

February 2009 - Nigeria

Barring the familiar dilly-dallying and unnecessary ceremony that have often put the consideration of the final report of the House of Representatives Committee on Power and Steel that probed the famous NIPP in abeyance since the report was submitted over five months ago, the federal lawmakers appear set to begin the consideration of the probe report this week. The House instituted the probe into the Obasanjo government inspired National Integrated Power Projects (NIPP) following the worsening power situation in the country despite the alleged commitment of over $16 billion into the project, aimed at improving the country’s electricity generating and supply capacity.

While I join millions of other Nigerians in commending the lawmakers’ effort at unraveling the actual expenditure on the power sector improvement scheme between 1999 and 2007 and determining the reasons for the persistent epileptic power supply in the country despite the alleged huge spending on the sector. I hereby call on members of the House to be guided by the golden rule of objectivity in considering the report. Since the inauguration of the House panel up to the submission of its report, it is generally believed that as it is, the fate of the country, as far as power generation and supply are concerned, squarely depends on the outcome of the probe that understandably generated animated interests across the length and breadth of the country. So, if not for anything but for the sake of Nigerians who face daily hardships as a result of unstable power supply, the honourable House members should endeavour to discuss the probe report in a uniquely dispassionate manner devoid of any intent to witchhunt or nail any perceived political opponent. For as I proceed to reveal in this write up there is more to NIPP than the sensational brouhaha that many are exposed to through doctored press reports and beer parlour discussions.

Although at a point, the integrity of the probe panel members was called to question over an alleged N100 million bribery scandal, this seems to have been put behind, at least officially, with the clearance of the NIPP probe panel by another ad hoc committee of the House. Despite this, however, some people still harbour grave apprehensions over the ability of the NIPP probe panel to deliver objective verdict. It is even widely believed that the panel’s final report was written by a consultant who incidentally was a failed contractor during the initial NIPP biding process! Members should not allow their personal biases to becloud their sense of objectivity. They should not use the report to witchhunt anybody or group of people for political reasons, as some of those people the panel report is said to have indicted have really paid their dues in terms of positive contributions to the development of the country and the power sector in particular.

It should be noted that contrary to the fallacious insinuations making the rounds in the country that the huge funds committed to the NIPP and other power projects during the Olusegun Obasanjo’s administration had gone down the drain, the projects were not only well conceived, they were also patriotically executed with the overall interests of the nation and its people at heart. In fact, some of the projects like the ones sited Papalanto, Omotosho, Geregu and Alaoji, have either been completed or are at advances stages of completion but they cannot yet be put to use due to non-completion of gas supply infrastructure to power them. Surely, this problem can neither be blamed on the government officials in charge of the NIPP nor on the contractors handling the projects.

Also, much of the trumpeted $16 billion said to have been spent on the power sector since 1999 are in fact non NIPP expenditures in the energy sector. These include PHCN’s internally generated revenue, which it uses for salaries and overheads as well as monies allocated to the Energy Commission of Nigeria (ECN), which was not part of the power sector arrangement at that time.

Interestingly, it was revealed to the House probe panel during one of its public sittings that approximately $6 billion, and NOT $16 billion as being mischievously and erroneously bandied about was spent. And out of this, only $3.147 billion was committed directly to the NIPP while the PHCN get $2.25 billion and rural electrification $455 million. He added that a significant chunk of the $3.147 billion allocated to NIPP remained in CBN escrow account or tied down to specific letters of credit that will not allow for its release without the contractors having reached certain certifiable project milestones. Part of the $3.147 billion NIPP funds, was used to procure 21 gas turbines for NIPP phase 1, balance of plant (BOP) also for NIPP I as well as 11 power stations, 102 transmission lines/substations, 16 gas pipelines and 290 distribution projects all over the country.

It is necessary at this juncture to puncture the misconception of lack of activities at most NIPP sites in the country as purported evidence that the huge investment in the power sector has gone down the drain. By the nature of the EPC model (Engineering, Procurement and Construction) adopted for the NIPP contracts, the actual work progress cannot be fully appreciated by mere visits to the sites and looking for physical structures. Engineering and procurement are the necessary pre-construction phases of contracts in this sector and they are not done at the project site. The engineering aspect, involving fabrication and which is mostly done in the contractor’s office may take up to six months or more depending on the complexities of the specifications. On the other hand, the procurement segment, which involves placing orders for the equipment needed, may take up to 18 months or more to materialize. These two phases (engineering and procurement) constitute about 80 per cent of the total contract in this case and as such it is worthless, indeed wasteful to clear the project sites too long before the completion of these preliminary segments of the contract. This is why it appears, during the probe panelists’ visits to some project sites, that no activity was going on at those sites. It also fueled insinuations that some of the sites could not be located, whereas most of the projects had in fact progressed up to 70 per cent completion level.

The general air of frustration that currently pervades the country over the poor power situation despite the purported huge investments that have gone into the power sector is quite understandable. But this could hardly be blamed on any particular government official or even the contractors. One of the culprits is ironically the bureaucracy put in place to ensure quality job delivery and strict adherence to due process and principle of accountability in the handling of public funds. Thus, the delay in payment of contract down payment to various contractors and delay in establishing letters of credit because of the need to strictly follow due process in fund disbursement invariably contributed to the delays in the implementation of the NIPP projects. Social and political impediments also militate against the prompt realization of the power dream envisioned by the NIPP initiators. Due to delay in payment of compensation to host communities, some sites could not be promptly handed over to some contractors and the activities of militants in some areas impeded early commencement of work at the NIPP plant sited in those areas. Unlike other projects that could not be put to use even when partially completed, power projects have to be fully completed to become operational. Thus, the impact of the large number of on-going NIPP projects in the country cannot be really felt by the public until they are fully completed and commissioned.

There is no doubt that the NIPP project is viable and holds the ultimate solution to the nation’s power problem. It should be noted that prior to the inception of the Obasanjo administration, Nigeria had only seven power stations. But between 1999 and 2007, five new power stations had been built and seven more are under construction. Definitely, that government and some of its functionaries deserve our accolades instead of vilification. Not only did all contracts in the power sector awarded by the administration go through rigorous due process, its NIPP initiative blazed new trend in electricity power generation effort ever embarked upon by any administration in the annals of the nation’s history.

It is therefore politically expedient and economically wise for the projects to be completed together with the gas supply projects complement in order to guarantee the improvement of power supply to Nigerian homes and industries.

The House should use its good offices to reject any attempt to revoke the NIPP contracts, as this would be counter-productive. We should avoid a repeat of the situation whereby the 2002/2003 policy vacillation rubbished the little improvement made in the power situation in 2001. The expected gains of the massive NIPP projects are again coming under severe threats by the on-going impasse over its funding.