….As Minister speaks on the three critical sectors at Meeting of Investors
….”The ship of state is now on the right course and I'm confident that it will berth safely”, he says
...Says Government would soon unveil its Energy Mix Plan for Investors’ guidance
...Roads prioritized with attention to those with the heaviest traffic and economic strategic significance
…”We cannot bridge or dent our deficit in housing unless we industrialize housing delivery”, says Minister
The Minister of Power, Works and Housing, Mr. Babatunde Fashola SAN, at the weekend in Lagos again assured Nigerians of the Federal Government’s determination to put in place sustainable infrastructure for delivering Power, good road network across the country and affordable housing , even as he unveiled how challenges on the path to achieving this can be converted to opportunities by investors for economic growth.
Fashola, who spoke at the African Capital Alliance’s 2016 Investor Day Dinner at the Eko Hotel and Suites, declared that after many years of errors and unsustainable efforts, the ship of state has been steered on the right course while outlining areas in the critical sectors where his Ministry plans “to do things differently” to achieve the required results.
Beginning with the Power Sector, the Minister, who noted that there are problems along the entire power chain, “from distribution, to transmission, generation and gas supply including a cross-cutting liquidity problem”, said the existing gap of meter supply in the distribution segment of the power chain has created enormous opportunities for local production.
He said local producers or investors were expected to at least meet a significant local content participation that would help Small and Medium Enterprises especially participate in supplying the meters and developing capacity and jobs adding that there were still an estimated three million consumers who needed to be metered.
According to Fashola, “Apart from metering, the distribution companies have aging assets: transformers, ring main units, poles, cables, breakers and so on, some of which are 20 to 30 years old”, adding that for the distribution companies it must be a period of running repairs. “It is a problem on one hand and enormous opportunity on the other hand”, he said.
On how to overcome the challenges of metering and replacing aging assets, the Minister suggested that Distribution Companies who own 60 per cent of the undertaking could raise capital to buy and supply meters and replace such aging assets adding, “Why can DisCos, for example, not divest some of their shares in order to raise funds to finance the business?”
“Or better still, why can DisCos not have strategic shares arrangement in exchange for goods like meters, cables, etc. with companies who make those products which the DisCos need to service their customers?”, he asked adding that the Companies and Allied Matters Act clearly allows shares to be sold for cash and for kind.
Noting that the major problem in the area of transmission was that the transmission capacity was not developed to cope with the generation capacity, Fashola said apart from the plans to identify about 47 transmission projects that could be completed this year to deliver 1000 MW more carrying capacity, the Ministry has resolved and has started working on actual numbers of how many transmission towers would take the nation to 7,000, 10,000, 13,000, 16,000 and 20,000MW in each growth plan.
The Minister, who pointed out that his Ministry is acting through the Federal Government owned Transmission Company of Nigeria (TCN), said the five-year growthplan was a shared statement by TCN adding, however, that to become plans his Ministry has to factor in how many kilometres of cables and wires each stage would require, how many Transmission Transformers would be involved and how many breakers would be required.
According to the Minister, “the roadmap to sustainable transmission requires that the five-year 20,000 MW plan must have an implementation programme. I liken the transmission part to a transport business; and every transporter must understand that there must be enough buses to move passengers, and he must bridge shortfalls by getting more buses.A situation where power generation installed capacity is in the region of 7000 MW and the transport system is in the region of a 5000 MW carrying capacity is not sustainable”.
Saying the number of tons of steel required in the implementation of the plan must also be factored in, Fashola added, “Beyond that of course, we will secure the right of way, the way leave issues, compensation claims and build a programme that takes care of these issues to ensure that implementation is not frustrated by court cases or outright destruction of Transmission towers as we have experienced before. This seems to me to be the road to sustainability”.
The Minister noted that as the plan is progressing, the Ministry is constantly receiving expression of interests from people who want to invest in transmission grid expansion on a Public Private Partnership basis (Build Operate and Transfer) adding, “We are open to it. But we recognize the need for assurances of recovery”.
Noting that the current grid is hundred percent owned by government, Fashola , who said he had challenged the experts to come up with proposals about how expansions could be done modularly while still being interconnected to the main grid, added, “In this way we can have state expansions, or regional expansions that though connected to the main grid can be ring-fenced for recovery and accounting purposes”, adding that this is now being done, not by consultants but by the nation’s civil servants.
On generation, Fashola, who noted that previous targets have not been met because they were set without concrete plans, however reiterated that the roadmap to sustainable power was to get incremental power on a regular basis adding that the first thing to do was to solve existing problems, and to plan the delivery of immediate and future additional power.
The Minister, who listed the projects that would lead to incremental power, said Zungeru Power Plant in Niger state, conceived to deliver 700 MW of power, would be delivered in 2019 while Azura Power Plant in Edo state, conceived to deliver 450 MW now has a delivery date of December 2018.
According to him, while Aba Power Plant project, conceived to deliver 140MW to the Grid should be completed “soon enough”, Mambila which had been on the table since about 1982, would perhaps be the most defining in the road to incremental power with potentially 3,000 MW of power in Taraba state.
“These initiatives, the 215 MW plant in Kaduna, the 40 MW plant in Kasimbilla, the 10 MW solar plant in Katsina and the 222 Gbarain in Bayelsa, all of which can be completed this year subject to budget, or latest next year, are the roadmaps to incremental power supply”, the Minister said.
The Minister, however, said for investors, the biggest news was the planned Energy Mix which, according to him, has already been developed in house by civil servants and public officers adding, “Since the vision 20 20 20 plan was launched, there have been statements of the need to use all the possible sources of energy available, gas, power, Hydro, Solar, wind, bio mass, nuclear, coal, etc. But beyond those statements, no sustained steps have been taken, to the best of my knowledge, to organize how we will harness these energy sources”.
“I am aware of gas to power initiatives in the Niger Delta and South-South area, but how did we come to build a gas power plant in Kaduna, several hundreds of kilometres away from our most prolific gas sources? Why are we investing extensive solar projects in the rain forest area of Nigeria instead of in Jigawa, Kano, Borno and other places where there is abundant sunlight and irradiation as well as the required land space?This is what our Energy Mix will do. We will unveil it soon enough for investors guidance,” Fashola said.
The Minister explained further, “Two things to expect will be that closeness of our plants to fuel source, such as solar, wind, gas, coal or Hydro means there that the power will be likely more affordable, it also means the work of the transporter transmission is easy to plan because all the passengers are in one location, evacuation is easier and more efficient”.
On gas, Fashola, who described it as the nation’s “most reliable source of power ahead of Hydro (water)because 22 out of 25 power plants depend on gas”, added that now that the issue with the domestic market price has been reviewed upwards and has generated interest in the domestic gas aggregation, processing and supply business, the next step was the licensing of many of the non-associated gas fields and where already licensed, the facilitation of third party operators for local gas supply only.
“This is a huge market that requires investment, because the price is now assured, it is passed through tariff and therefore recoverable, and the Bulk Electricity Trading company, NBET, is authorized by the Ministry to raise funding to Guarantee and secure payments across the value chain”, he said.
On roads, Fashola listed what has been done in the past that impeded road development in the country to include not paying enough for road use and maintenance, overload of our roads with axle load and not growing the network as the population grew as well as not funding Road contracts properly.
To overcome this and achieve sustainable road infrastructure development, the Minister said the Federal Government has upgraded the budget to finance infrastructure adding that instead of the immediate past when the infrastructure budget was barely 15 per cent although Nigeria was earning $100 per barrel of crude oil, the present administration, with less resources from oil, has committed 30 per cent of a bigger budget to road infrastructure financing. “This is the first step to sustainability”, he said.
“But it is not enough to budget. It is important to implement the budget and use the finances properly.Today, with about 206 road contracts already awarded in the past and not completed, it does not make sense to start any new roads when the amount needed to complete is about N1.7 Trillion and the budget for the 3 (Three) ministries is N433 Billion , as proposed by the Executive”.
Reiterating that the priority of his Ministry was to finish as many already awarded roads as possible, the Minister, who maintained that investors were welcome to invest on new roads and alignments under the Public Private Partnership (PPP) arrangement, said to be able to finish as many roads as possible, the Ministry “planned in budget 2016 to depart from the practice of yesterday, of giving every road the same amount of money irrespective of whether it is just starting or nearing completion”.
“The Ministry of Works was to get N268 Billion,Power N99 Billion and Housing N66 billion.So instead of splitting N268 Billion over 206 roads in 2016 and not finishing any road, we plan to phase 206 roads over 3 years and ensure that we complete or substantially progress the completion of existing roads in each of the 6 (SIX) geo-political zones”, he said.
According to him, “We have prioritized the roads that get attention to those with the heaviest traffic and economic strategic significance; the roads that evacuate farm produce, airport cargo and passengers, seaport cargo and tank farm petroleum products.
“We are working on the final details of road sector reform legislation that strengthens maintenance capacity, accelerates the negotiations and approvals of road concessions and provides legislative support for tolling for recovery of investment and reforms the Federal Highways Act which is 60 years old”, he said.
The Minister commended the Ministry of Transportation’s aggressive pursuit of the rail programme “which, in the fullness of time, will bring a lot of axle load relief to our roads and ensure that they reach their design life utility”, adding, “This is the road to sustainability in Road infrastructure”.
On the Housing Sector, Fashola, who noted that although there is no disputing the housing deficit in the country, the size of the deficit was still in dispute, added that although the country has had “a few initiatives by President Shagari and Governor Jakande in the 2nd Republic, and a few starts and stops”, what is missing is “the keyword in this dinner speech topic – sustainability”.
“Some of the records I have seen suggest that the Federal Housing Authority has delivered less than 40,000 homes in about 40 years.Apart from the fact that this number was not delivered on a consistent basis of 1000 homes per year, the long gaps between starts and stops clearly indicate the need to change how things have been done”, Fashola said.
He noted that there is also “the quest for what is affordable, or social housing, or housing for the poor as they have been variously defined” adding that in order to have a sustainable and affordable housing there must be an agreed common purpose and a parameters as well as those who qualify and a housing design that has national acceptability, “taking into consideration our cultural differences”.
Saying that these questions need to be answered truthfully and honestly, Fashola declared, “It seems to me that we cannot sustain a thing unless our purpose about it is united, so that our actions about the thing are united”, adding that he has no intention of starting a housing policy without some indicative, if not very clear answers, to the questions.
The Minister, however, declared, “I have news for you. We are close, we are working on a Nigerian housing model that has an answer for Geo-political cultural differences while still looking the same.This is a joint effort of experts in the private sector who worked for the ministry as volunteers and also from the civil servants in the Housing ministry who represent our cultural diversity”.
“We are close to concluding on design, cost and other parameters before we move to financing.This is the rigor of planning implementation that gives life to statements that we sometimes erroneously call plans.This is the road to sustainability. This is the road I know. We walked this road on the Lekki Free Trade Zone. We walked it on the Eko Atlantic project. We walked it on the Lagos HOMS project that delivered 200 homes monthly during my tenure of service as Governor.I know that we are in the results business”, Fashola said adding that although sustainable results take time to plan , he has no doubt that “we are on the right path”.
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