Minister for works,power and housing
The Minister of Power Works and Housing, Mr. Babatunde Fashola SAN, has outlined the pathways which local and international investors must follow in order to tap into the immense investment opportunities in the nation’s Power and Infrastructure Sectors generally
Fashola, who reiterated the guidelines at the headquarters of the Ministry while playing host to a delegation of the Nigerian Investment Promotion Commission (NIPC) led by the Acting Executive Secretary of the Commission, Hajiya Ladi Katagum, said various institutions have been created by government to act as channels for doing business adding that investors should focus on doing business through those channels and according to laid down procedures.
One of such channels on Power investments, the Minister said, include the Nigerian Electricity Regulatory Commission (NERC) and other relevant institutions created by law adding that Government stipulated this to enable the institutions work and develop independently and allow government to face its assigned role, which according to him, is now largely regulatory.
He explained that for those who want to produce power, they must first have a license issued by the Nigerian Electricity Regulatory Commission (NERC), which according to him, has the mandate by law to do so adding that if they get the license, they need to get a document called Power Purchase Agreement which is being signed off by the Nigerian Bulk Electricity Trading Plc (NBET).
Noting that the Power Purchase Agreement is what really leads to Power as it enables the investor to get credit from the bank, the Minister added, “If you don’t have that agreement you won’t do a power project. And if your business plan and tariff plan is high, we won’t sign because we have an obligation to consumers; to give them power on a competitive basis, a fairly low price basis that enables the investor to recover his money and make profit but not to profiteer”.
According to Fashola, “It is at that PPA level that government protects consumers; that is where we protect consumers, that you cannot go and throw any kind of tariff on them”. He cited an example of a deadlocked process where NBET was not ready to approve a tariff set by the investors which was well beyond the target set in the industry.
“They wanted to set their tariff for coal power at 18 cents per kilowatt/hr. Now if you multiply that with N200, assuming that was the exchange rate, you would be getting about N36 well over and above the contentious N24 tariff. So who is going to bear the N12 difference?” he asked.
He added, “That is where we begin to protect the consumer. You cannot put this in the market. Go and look at your business plan, may be you borrowed money at a very high cost. May be you have inflated or you have improperly planned your business, may be the business plan was just not well structured. How do you rearrange it? Some of the proposals we made yesterday to the developers, instead of doing 300MW why not start with 50MW first? Maybe the price may come down, then you can fit into the tide. That is where we get involved, when they are deadlocked”.
For those who want to generate electricity, the Minister said, “There is an existing policy to generate electricity by as many means as is possible; by gas which is well known, by coal, by hydro, which is water, by solar, and in some places where there is viability, by wind;”, adding, however, that not all of Nigeria is viable for wind energy.
Noting that all the legal requirements and procedures for investment in the Power Sector are in NERC’s laws “by which anybody that wants to deliver power; that wants to produce electricity, must go”, Fashola, who cited investment on gas as example, declared, “If you want to do gas power you must show us that you have a gas agreement”.
“If you want to do coal you must show us that you have a mining license, if you want to do hydro you must show us that you have collected a water aggregation license and all that”, adding that government stipulated that because there were power plants built in the past but there was no gas. “So while we are solving all those problems we don’t want them to multiply”, he said.
Fashola, who noted that some of the investors sometimes believe that a visit to the Minister’s office was all they needed while others even write directly to the President, the Minister declared, “So business men and investors must be thorough, they must respect our laws, they must follow our processes”.
According to him, “The education must continue; we built institutions, we encourage business men and investors to engage with those institutions because we believe that they will work and they should be allowed to do their work so that we can independently appraise them”.
“Once we crowd them up, they cannot do their work independently. That is part of the picture”, he further explained adding that for investors who say, they don’t want to generate power but want to bring in money to expand the Grid, there is an accounting process requiring how much the investor is bringing and to do what?
The Minister explained further, “Again you have to have approvals and licenses. Your plan must synchronize with that of the Transmission Company of Nigeria (TCN) because they have the mandate to manage the Grid. So if you want to develop Grid expansion where they don’t have customers, you won’t have a business”.
Also noting that there is also room at the distribution level for metering and for those who want to sell transformers, Fashola declared, “It is the DisCos who need them”, adding, however, that whenever some serious business comes to the Ministry, they would be referred to the DisCos.
“In fact one of the things we concluded at our last meeting in Maiduguri was that for business that come to us, the DisCos must give us their commercial contacts so that we can reference those things to them directly and the Ministry still has that list; they can share it with you”, he told his visitors adding, “It is part of redirecting investment to the place where it should go so that as a Ministry, we can face our regulatory work, solve disputes where they exist and make progress”.
To further ventilate the education of investors, Fashola advocated “a local conference”, where, according to him, the Ministry’s top hierarchy and regulators can interact with and enlighten potential investors.
“There is a lot of young people, who either have not bothered to read the law or have gone out to do business ahead of the rules, that we need to bring back so that they will understand the rules. There are people who come and want to do business they just write to the President and I say where will that work?” he said pointing out that And some of those people could not even see the council chairman in their own countries for business. but they come and write to our president.
The Minister, who reiterated the need to encourage the institutions to develop their expertise, added, “We must encourage the investors and business men to engage our institutions and let the institutions do their work. If we insist that people engage with them they will work”.
Throwing more light on investment opportunities in Power, Fashola, who said the Ministry was in receipt of “all sorts of Power ideas, tested and untested ideas”, added, “But it is important to reiterate that government’s role in Power development is now largely regulatory”.
The Minister directed investors who are interested in building transmission lines to go and discuss their proposals with the Transmission Company of Nigeria (TCN) adding that if they have problems the Ministry would intervene to solve the problems. He also advised people who want to supply meters to contact the DisCos as “Government is not buying meters anymore but driving policies to ensure that consumers get meters”.
“Government is regulating standards of safety of meters and the training and installation process to ensure safety. But we don’t issue LPOs for meters anymore. It is the old PHCN and NEPA that used to do that. All of that distribution aspect has been sold to 11 companies, the DisCos. So anybody who wants to supply meters should do business with them’’, he said.
On other issues which government could intervene, Fashola also listed land citing example of a situation where government has to step in to enable an investor wishing to embark on a power project which, according to him, was supposed to deliver 400MW realise his project. “But they don’t have land. They have some documents which are yet to be signed. I have stepped in to see how we can resolve that”, he said.
On infrastructure generally, Fashola said the first thing was for government to accord due respect for contract adding that it is important, both as a government and as a people, that when administrations change it should not be basis for any capricious cancellation of obligations.
“I think that is a very important thing that we must put forward. Undoubtedly infrastructure is important to support investment which is what government is focused on trying to bridge the infrastructure deficit in order to improve competitiveness in our business environment. A clear fiscal policy that enables capital injection and capital repatriation will be helpful and all of these are being dealt with simultaneously by government”, he said.
Assuring investors of security for them and their assets, Fashola declared, “That again is where government is showing its capacity to protect investment and to recognize that the most important investor is the local investor. We are mindful of the interest that has been shown in the sectors where our Ministry has responsibility especially Power and also Real Estate and Housing Development”.
“But we also see that some of the decisions of immediate past had been driven by businessmen rather than government policies. We see that it is the policy of government that should enable business to take a position”, the Minister said citing as example, Housing where he said the Ministry desires to put in place “a sustainable plan that involves houses that people can own not only in monetary value but because it appeals to them”.
According to the Minster, some of the previous initiatives have not had the national ownership appeal adding that people have had houses that did not meet their expectations so they were not even taking them up.
“So, some of the developers and “businessmen” sent us all sorts of designs. So per day we reviewed as much designs per letter. How do you evolve a national concept when the designs change per letter? If you use only two letters per day for example, you review 480 letters per year. How do you plan with that?” he asked adding that what the Ministry had done was evolve its own designs.
Fashola, who said that the designs have now been finalized, added,
“We are finalizing on the cost, we are finalizing on some of the materials we need to build when we start to build so that the data will be available to local investors who can plan their production to supply what we need – doors, windows, electrical fittings and so on and so forth”.
“Just yesterday we found out that there was no known local sockets manufacturer in Nigeria. But we met one yesterday and we challenged him to give us a design because these are some of the things we don’t want to import anymore. So these are some of the things that are happening in our housing sector”, he said.
He said the Ministry has adapted its designs to fit the climatic and weather conditions in different parts of the country and also to respond to some of their cultural needs while trying to manage the cost components adding that these would be presented when it is concluded so as to help to inform investors the kind of buildings that would be considered.
“We don’t want them to impose their own designs and building materials largely imported and all of that on us”, the Minister said adding that there are people also who are canvassing to join but clearly don’t have the capacity to deliver.
“Some have boasted that they can do 10,000 but they have not done one and even those who had tried to do 300 had ended up doing just 20. The reason for that we can interrogate and we are trying to ensure that such do not happen; so people are assigned the capacities they can demonstrate and from there they can increase and do better”, he said.
Earlier, the Acting Executive Secretary/CEO of the Nigerian Investment Promotion Commission, Hajiya Ladi Katagun said she led other members of her management staff on the visit to the Minister to discuss the investment opportunities in the sectors covered by the Ministry in order to be able to respond appropriately to the enquiries being made by potential investors to her organization.
The Minister, who later presented copies of,“The Nigerian Power Sector Investment Opportunities and Guidelines” to the NIPC Ag. Executive Secretary was joined by the Minister of State, Hon. Mustapha Baba Shehuri, the Permanent Secretaries, Works and Housing, Engineer Abubakar Magaji and Power, Mr Louis Edozien among other top officials of the Ministry during the courtesy visit.
