By Babatunde Raji Fashola, SAN
It is no longer news that the Federal Executive Council, the highest executive decision making organ of the Federal Government of Nigeria has now been inaugurated.
That happened on Wednesday the 11th November, 2015 which is 28 days ago.
It is also no longer news that 3 (Three) Ministries or areas of critical public service of Power, Works and Housing have been merged into 1 (One) under the superintending authority of myself as substantive Minister and Mustapha Baba Shehuri (Honourable Minister of State) with 2 (Two) new Permanent Secretaries, Engr. Abubabar Magaji, redeployed from the Ministry of Interior to Works and Housing; and Mr. Louis Edozien from the private sector to assist us.
Since our inauguration we have spent the last few days, getting to know ourselves and our officers, assessing the status of works done in all Ministries, meeting with some of our parastatals and corporations; (which is still on-ongoing) and generally trying to understand where things stand, where the problems are, what can be solved, what cannot be solved, what must continue and what must be altered.
At this point I must express our gratitude to all the Directors, Assistant Directors and their entire staff, not only for the warm reception thus far, but also for their time and the information they have shared with us thus far.
While our work of assessment, and detailed planning and development of workable solutions is an ongoing one that will take some time, we have considered it expedient to make this briefing for the purpose of setting the agenda, owned clarifying emerging issues.
We are not unmindful of the huge expectations of the Nigerian public who voted for the All Progressive Congress message of CHANGE and elected President Muhammed Buhari to office.
But I must say that all of us; government functionaries and citizens whom we serve owe no less an obligation to be fully mindful of the commitments of Mr. President which earned him the mandate of Nigerians.
Mr. President promised to address the challenges of security, corruption and dwindling economic fortunes of Nigeria.
This is the heart of the social contract, because this is what Nigerians voted for.
To hold the government to a higher commitment at this point is to seek to vary the social contract.
My attention has been drawn to some news reports where it is said “that an agenda is being set for us” as to what we must do.
At this point, we can have no agenda other than the ones Nigerians voted for, namely security, corruption and the economy.
We admit that our 3 (three) Ministries have an enormous role to play in meeting this agenda.
We commit all our skills, energies, and collective integrity unreservedly to playing our part, but how much success we deliver is dependent also on the citizen’s commitment to their own part.
If our understanding of our mutual commitment under the social contract is united, our purpose will be united and no task will be too big within that Agenda that will defeat our commonality and unity of purpose.
Clearly good roads will help re-flate and grow our economy, reduce travel time, cost of transportation of goods and services, and restore jobs that have been lost to transport dependent services. They will improve safety of lives and property and our security index.
Predictable, stable, and ultimately uninterrupted power supply will be a critical and defining component of our economic renaissance, job creation, GDP growth and reduction of income inequalities.
Construction of houses will complement the economic growth drive by direct and indirect jobs in the housing value chain from construction companies, to artisans, labourers, vendors and many more.
WHERE WE ARE TODAY (ROADS, POWER, HOUSING)
We are at a point where the 2015 Budget made only a provision of about 16% amounting to approximately N557 Billion for capital spending out of a total budget of over N5Triilion.
The first thing that must change is the Capital to Recurrent ratio of the budget, and our colleagues in the Ministries of Finance and Budget and Planning are working on this and they will address you at their own time on the changes they have made and what citizens must do to enable them achieve that plan.
We are at a period when oil prices have dropped from where they were a year ago. We spent less on capital when we earned more from Oil, today we must spend more on capital even as we earn less.
As I have had cause to say before, the budget is the article of faith of every serious nation and government and our resolve to do more capital spending with less resources must be indicative of our seriousness to reflate this economy.
The records that have been made available from previous budgets show that the last time Nigeria budgeted over N200 Billion in a year’s budget for roads was in 2002. It seems that as our income from oil prices increased over the last decade, our spending on roads decreased.
As far as status reports go, the Federal Government budgeted N18.132Billion in 2015 and the Ministry of Works got N13Billion for all roads and highways in 2015, although it has contracts for 206 roads, covering over 6,000km with contract price of over N2 Trillion.
Our ability to achieve connectivity of roads depends on capital spending in 2016 to pay contractors and get them back to work.
Our short term strategy will be to start with roads that have made some progress and can be quickly completed to facilitate connectivity. We will prioritize within this strategy by choosing first the roads that connect states together and from that grouping start with those that bear the heaviest traffic.
As at May 2015, many contractors have stopped work because of payment, and many fathers and wives employed by them have been laid off as a result.
Some of the numbers from only four companies that were sampled, suggest that at least 5,150 workers have been laid as at March 11, 2015; and if we realize that there are at least 200 contracts pending, on the basis of one company per contract.
If each contractor has only 100 employees at each of the 200 contract sites, it means at least that 20,000 people who lost their jobs can return to work if the right budget is put in place and funded for contractors to get paid.
The possibility to return those who have just lost their jobs back to work is the kind of change that we expect to see by this short term strategy.
In order to make the roads safer, we intend to re-claim the full width and set back of all Federal roads, representing 16 percent and about 36,000km of Nigeria’s road network by immediately now asking all those who are infringing on our highways, whether by parking, trading, or erection of any inappropriate structure to immediately remove, relocate or dismantle such things voluntarily. This will be the biggest contribution that citizens can offer our country as proof that we all want things to change for the better.
For clarity it is important to say that although the state Governments own 18 percent of the total road network of about 200,000km, while the Local Governments own the balance of 66%, the 16 percent owned by the Federal Government carries an estimated 70 percent of the total traffic because of their length, width and inter-state connectivity.
For those who seek us to compel them to stop these habits of the past, our resolve to do so will be unyielding, because that resolve represents the will of the majority of Nigerians expressed through 15,424,921 votes of Nigerians who mandated our president to effect change.
It seems to us that a social contract is an exchange of promises and actions; so if we seek change we must give it.
From these, we will move on to construction of biggest highways and bridges, sharing the specifics as we go on, with a view to ultimately updating the National Infrastructure Master Plan if need be, which we intend to retail to all Nigerians down to the schools, so that everybody in every State knows what is coming in terms of infrastructure, where it will be, when it will start and how long it will take.
Let me start by acknowledging the decision of Mr. President to appoint a Permanent Secretary from the private sector to the Power Ministry in the person of Mr. Louis Edozein.
I am happy to say that of all the people I have spoken to over the last few days who claim to know him, nobody has a bad word to say about him.
I will need his vast knowledge in the industry to guide our choices and decisions.
Let me also acknowledge the work that the Vice President and his Power Advisory team have done in advance of our arrival to bring increased transparency to this sector by the daily report of the performance of power installations nationwide which I have found most helpful in getting information about what is happening and where. This is also Change in the way things are done
As far as status reports go, it is important that Nigerians must understand where we are, what our role is, and what to expect of us.
Until around November 2013 the Government was the owner of all power assets in Nigeria except a few independent power plants and other smaller assets.
This control was exercised through the Power Holding Company (PHCN) which (a) produced the power – generation; (b) transported the power – transmission; and (c) sold the power to consumers – distribution.
This has changed with the implementation of the Electricity Power Sector Reform Act of 2005.
What this means is that our Government policy like in the Telecoms sector and the Mass Media, has also changed in the power sector, from Government operated to private sector operated and government enabled.
Today, private companies have the responsibility for generation.
Virtually all the generation on the national grid is produced by 6 (six) of the companies which were previously Government owned, 2 (two) international oil companies ( Shell and Agip), and a company owned by the Federal, State and Local Governments (The Niger Delta Power Holding Company , NDPHC), whose generation assets are in the process of being sold to private investors. These companies are the ones called the generation companies of Gencos for short.
There is one company owned by Government, under a management contract with Manitoba of Canada and it is solely responsible for transporting all the power. It is called Transmission Company of Nigeria or TCN for short.
Eleven distribution companies are now responsible for bringing power to your homes. They are the distribution companies known as Discos for short.
They must buy the power from the Gencos, who must buy gas from the gas companies in order to produce power; they must then pay TCN to carry it to their substations, and distribute to the houses in their distribution areas; and this is where the tariff issue comes in.
Power is a product, manufactured by raw material inputs of labour, gas and financed by banks loans with interests. To transport it, the TCN much charge for it; and the price is added to the cost of power which the Discos buy.
This point is important to note because I will come back to it when I address the problems, especially tariff.
As we all know, we took a bold step like this with NITEL and sold licenses to telecommunication companies called Telcos. We did this is 2001 and today we have achieved significant telephone coverage even if some people cannot still afford a phone. That was 14 years ago.
I believe we would be in a better place if we had implemented the Electricity Reform Act in 2005 or shortly thereafter when it was passed.
But we sadly did not do so until 2013 when the privatization was finally completed, which means we lost 8 (eight) years, and we have progressed only for just about two years, since the private companies took ownership.
Of course this change of policy which is welcome, comes with its own challenges, human resistance, suspicion, vested interests, learning new things and so on, and all of these are quite normal when things change. It is our responsibility to navigate and overcome theses challenges.
If it is any comfort, countries like Brazil, South Africa, India and Mexico, to mention a few, have passed this same road before and they are clearly better for it. It is now our turn to do so, and we must resolve to make a success of it. We can do by relying on our own recent experience.
Now let us think of where we were in 2003, two years after privatization of the telecoms sector and the coming of GSM. How many people could afford a telephone? Remember that we were all being billed per minute even if we spoke for only 10 seconds.
We complained that the tariff was high but today, per minute billing is now history, replaced by per second billing and all sorts of promo to give customers a choice.
One yeas after GSM came cities like Ibadan, Zamfara, Ebonyi, Bayelsa and Zaria were either not connected or struggling to be connected as we are with electricity today.
Nobody could do more than talk and text on the phone at the time. Today we send pictures, watch Tv and movies on our phone and do banking and other businesses and the scope is still growing.
Some people have “ported” and changed their service providers, and we are all learning to conserve cost because our phones have meters, which are the timers that bill us as we use them; and we get disconnected when there is no credit.
Most importantly, many people have become employed selling re-charge cards, telephones, working in call centres, maintaining towers for Telcos and so much more.
This is what will happen on a large scale, when (not if) we diligently pursue the privatization of power.
Today, we are at a point when government spending on all aspects of power has been significantly reduced on distribution and generation, except for some projects started under the National Integrated Power Project (NIPP).
The spending of government is now largely focused on transmission network and gas supply while Gencos and Discos focus on producing power and distributing it.
Government is now a regulator through the National Electricity Regulatory Commission (NERC) which is like the National Communication Commission (NCC) which regulates Telcos.
We intend to strengthen this part of our responsibility so that we can hold the Gencos and Discos to their contracts with citizens.
But before we do that, we must play our own role of providing gas and expanding the Transmission Network.
More importantly as a government and consumer of power through our ministries departments and agencies, we must show example at federal, state and local governments by paying up backlogs of power bills and ensuring from there that we pay for what we use.
Our ministry intends to champion this at the Federal Level and I hope that the State Governors, heads of parastatals, National and Sate Assemblies, the various State and Federal Courts, Local Governments, Military, police, and other related security agencies will find this a worthy undertaking to join and ensure payment of all their electricity bills
I cannot imagine any government today not paying for airtime for telephone use. The truth is that is we don’t pay that business will collapse.
There are a number of issues that beset our Gas sector such as the environmental issue and the availability of gas infrastructure such as pipelines and the issue of pricing which are all the responsibility of other Ministries.
Subject to budgetary approvals and financing, the ministry of petroleum indicates their ability to build certain critical pipelines to tranport gas to the power plants that will add another 2,000 mw to our stock of power within 12-15 months.
Of course the appropriate pricing of gas and it’s impact on tarriff is another matter entirely. If the local market was offering $1.30 per unit of gas (which has been reviewed recently to $3:30 I believe) and the international market is offering about $4:00 and above, your guess is as good as mine where supply will be available and where it will be short.
Today, the amount of power that is available is slightly larger than the capacity which the Transmission network can support.
Let me again take a little time to explain what the transmission lines are and what TCN does.
The transmission lines are what we locally call “High Tension Wires” which run on high towers across our country over land and over water.
As was stated earlier they transport power and in that sense they are not different from a bus transporter who has to carry passengers. Where we are today is that the passengers, in this case, the power being generated, are more than the number of seats on the bus, and there are more passengers coming.
So we will do what any serious passenger operator must do. Get additional buses to carry the waiting passengers and plan to buy bigger buses for the additional passengers that are on the way, that is the extra power that is coming.
That is what TCN has to do.
We have identified a total of 142 (One Hundred and forty-two) projects of which 45 are at 50% level of completion and about 22 (twenty-two) can be completed within a year.
The budget estimates are known and we intend to aggressively pursue completion to increase the carrying capacity from the Gencos to the Discos.
From there, we must expand the carrying capacity to run ahead of the generating capacity so that in future there will always be capacity to carry whatever power is generated.
By far the most complex challenge is the problem of tariff.
It is complex because it is more in the hands of citizens than in the hands of Government.
The role of Government is to set the tariff and in doing so, Government has committed to what is called a Multi-Year Tariff Order.
This was done in order to attract investors to the market, otherwise we will not have achieved the privatization if the price of the product is not attractive to the investors.
The tariff is the price of producing power. It covers cost of generation, gas purchase, transportation, transformers, staff costs and so on, disaggregated and charged per kilowatt/hour to make the business of power profitable.
What Government did was to spread it over a number of years so that the impact is not felt at once but over a periodic incremental process.
I know that it has been a contentious matter, but I make this fervent appeal to consumers to give us the benefit of doubt, to forbear and accept it.
This will help Government to maintain its credibility with investors, who will then have confidence in the sector and our economy that we are a Government that keeps it words and honour its contracts.
We are optimistic that like the per minute and per second billing issue in telecommunication, the market will plateau and stabilize.
Let me also state that these policies will also affect those of us who propose it in our different homes because we will need power in our homes, and so will our relations. Therefore we are not asking Nigerians to do what we will not do.
The surest way not to have power is to oppose the implementation of the Tariff Order.
For emphasis and clarity, let me state that the previous administration had actually approved the tariff in January 2015, but what they did not to was to fully implement it. They suspended the implementation of the part that affects residences in the onset of elections. After the elections the operators are now asking for payment because they were producing at current tariff and selling at old tariff. This is akin to another subsidy part of which Govenrment has paid.
What we expect to do is to liquidate verifiable and agreed debts that have accrued, approve a market tariff and hold the discos to a more efficient and fair collection system based on the use of meters, eliminate so that consumers pay for only what they use.
The Regulator, NERC, has been mandated to work out the fair market tariff and announce them when they are finalised.
We expect that this to aggressively energise the local meter production, sale, repair and maintenance industry and create spin off jobs for our people. We expect to see the growth of meter recharge small businesses like we saw in telecoms recharge cards and telephone hand set salesOne thing citizens can do, and which they must do, is to conserve power.
If we switch off light points, air conditioners, and other appliances, when they are not in use, the impact of the tariff regime can be contained because we will use less power even if the unit tariff cost goes up.
We have done it with our phones, when we “flash”, to conserve credit we must find the will and motivation to do it with power; because we must pay for what we consume.
The Housing sector presents an enormous opportunity for positively impacting the economy to promote not only growth but inclusion.
There have been a couple of National Housing policies and we intend to appraise the most current one to make changes only if necessary.
Beyond a policy, what is important is consistency of implementation.
Government will lead the aggressive intervention to increase supply, by undertaking construction of public housing and formulate policies that will invariably lead to private sector participation and ownership to reduce our housing deficit.
We are mindful of some numbers about the size of housing deficit. Those numbers need to be verified and we will undertake a process of scientific assessment to define the accuracy of that data as well as the actual demand.
But what those number do for us, no matter how big they are, is that they define our journey for us.
A country as small as Singapore with about 3 million people has consistently implemented a home ownership programme since 1960 and has accommodated 80% of 3 million people as at 2013, but not yet all of its people.
So for us, consistency is key, annual spending is an imperative. We must change the budget for national housing from N1.8 Bilion in 2015 to something in the hundreds of billions of Naira that matches our ambition.
If we can spend N10 billion in each state and the FCT on housing alone every year subject to (a) the capacity to raise the money and (b) the capacity to utilize the funds having regards to our current construction methods and the time it take to complete construction, which our ministry intends to change by research and industrialization of housing.
This is where those seminars and conferences will be useful but not before we at least start doing what we know so that our most vulnerable people can find jobs, before we start trying to improve.
If we achieve this, we will move from where we are now, start construction in all 36 States and the FCT and sustain this as we go along.
There has been a continuous debate about whether the houses should be “affordable”, whether it should be “low cost”, whether it should be “social” or whether it should be “mass housing”.
To the extent that we assume that “mass housing” is indicative of the need to increase production delivery and supply of housing, we understand what it means and we intend to address it.
As for the meaning of “affordable”, “social” or “low cost” we intend to conduct a national survey and get a feedback from our people as to what they want to pay and whether it is possible.
But we must be clear that sustainability is critical to solving the problem. One component of sustainability is that we must be able to repeat what we do, which means that we must recover the cost of houses, even if there is no profit, so that we can build more.
There will be no sustainability if we sell below our cost price.
Therefore, we must agree about who is entitled to a house and what type of house their income entitles them to.
We must also decide whether those who have no income can legitimately expect to own a home, without abdicating our responsibility as a Governrment to increase the capacity of ths economy to employ more people.
These are questions to which our national survey will be directed and honest answers will help provide a guidance for us to give you what you want, and not what we think you want.
Through construction, we expect to address economic commitments of change by stimulating jobs across the States especially for low income people like bricklayers, welders, carpenters, plumbers, vendors, who live on the margins of our society.
We are also considering the re-design of existing housing Roof types to make them ready to receive solar panels for electricity without damaging the roof or cause leakage during installation.
If we are successful, this will open a new vista for local manufacture of solar panels, create jobs at manufacturing, distributorship and installation levels especially for technicians as we have seen with cable Tv, which would not have happened without privatisation if all of us were still watching state owned television.
Of course if we achieve our goals, by complying with our laws, by transparent procurement process as we intend to, by focusing on good governance and getting value for money in government spending, incidents of corruption will become isolated and scandalous in a regime of laws and order; and we will have delivered on the anti-corruption leg of the change agenda.
Some short term specifics
Before I conclude let me address some short term specifics which subject to budget and financing changes our citizens should expect to witness in these three areas of roads, housing and power.
As I said earlier, jobs have been lost in the road construction industry which affected our GDP results and we started talking about recession.
The reason is simply because we did not budget enough for Capital expenditure and contractors were not paid.
As result workers were laid off to prevent companies folding up.
As at March 2015 the sample of jobs losses from only 4 four out of thousands of construction companies is as follows:
Construction job losses
Company 1: Junior staff – from 1800 to 1250, Senior Staff: 550 to 300. Expatriates 500 to 250. However, the situation could get worse
Company 2: local staff: 3000 to 1500. Expatriates: 100 to 50.
Company 3: Total 2500 to 1100 with more to go
Company 4: Local staff 4500 to 3000. Foreign: 250 to 100
By the end of September when budgets had been fully exhausted these numbers worsened.
I could not forget Company 5: whose CEO I met only on Tuesday the 1st December 2015; they had laid of 4,000 workers because Government was owing N3 Billion
By paying these contractors we will restore the lost jobs as an economic intervention of our promise of change.
We will start from Lagos-Ibadan expressway and work our way accross Nigeria gradually.
For those travelling for Christmas regret that because of the budget and financing structure in 2015 that have been explained and it is now only 17 (seventeen) days to Christmas, we cannot honestly promise that your journey times will be shorter this December but we are optimistic that with works hopefully resuming next year, things should improve over the next few months and progress.
The successful implementation of our plan to remove human and vehicular obstructions and impediments from our Higways will signpost the early signs of benefits of journey time improvements that commuters should expect.
This is as much the responsibility of citizens as it is that of Government.
The removal of settlements under federal bridges, along federal highways needs the buy-in of all Governors and the leadership of the Federal Government.
In the housing sector, if we complete our on-going projects, and we get land from the Governors in all states and the FCT to start what we know, using the LagosHoms model, we should start 40 Blocks of Housing in each state and FCT.
We expect State Governors to play a critical role here, by providing land of between 5-10 hectares for a start, with title documents, and access roads or in lieu of access roads, a commitment that they will build the access roads by the time the houses are completed.
We see this leading to potential delivery of 12 flats (homes) per block and 480 Flats (homes) per state, and 17,760 Flats (Homes) nationwide, for a start.
This will mean at a minimum of 4 doors and 2 windows very conservatively per home; a demand for 71,040 Doors and 35,520 Windows nationwide in year one, which we will encourage to be made in Nigeria. These figures are only examples and not fixed in definition and they are subject first to budgetary approvals and availability of finance.
The demand for those who will make and fix the doors and window, the hinges, the wood polish and the paint and tiles suggest the onset of jobs and change for our artisans and workers who are the real builders of every economy.
Out experience in Lagos was that about on every 1 (one) hectare of land where it was possible to build 8-10 blocks of houses, at least 1000 (One thousand) people got employed.
In 2015, the total budget for the power ministry was N9.606 Billion. Out of this N4.476 Billiion was for recurrent expenditure to cover salaries and overheads, while N5.130 Billion was for capital expenditure, supposedly for on-going projects.
This was a significant under-provision, even if it was to complete only 22 (twenty-two) of the 142 (one hundred and forty-two) transmission projects I mentioned earlier estimated at over N40 Billion.
Apart from these there is a 10MW wind energy project in Katsina nearing completion, a 215MW plant in Kaduna and the 3,050 MW plant in Manbilla Taraba State all of which need to be completed.
Our First priority is to get contractors to finish on-going transmission contracts to enable us transport the power being generated to the Discos to distribute.
Our second priority is to ask the Governors to help us identify and enumerate their most populous industrial and commercial clusters where manufacturing, fabrication, welding and related productive work is going on, especially by small businesses and to see how we can use the existing Legal framework to attract embedded power supply to these people who must be ready to pay for the power.
Let me say that in such cases, the tariff may be higher than the current official tariff, but it will be many times a significant improvement on what they have and we will need the collaboration of the Discos to achieve this.
We can move them from self generation with their generators of diesel petrol and noise which costs N48 kW/hour and more, which does not deliver all round electricity, to a place where they will get over 90% predictable and reliable power to run their businesses.
We have a success stories and experience to work with from some successful small independent power projects in places like Lagos, in Isolo industrial estate, Lekki free Trade Zone and Aba to mention a few, and we can expand on these.
The owners of the discos will be expected to give us their co-operation through flexibility and innovative disposition for emergency interventions while they plan and developer their wholesale roll out plan.
Our economy cannot wait indefinitely and suffer job losses.
If we succeed, we can get a lot of workers back to work in cottage and small industries which are the critical driving forces of our economy.
The foregoing represents the highlights of our roadmap to delivering the change you voted for in the short term.
We will be unveiling our medium and long term plans to you in subsequent briefings which hopefully will be regular.
I will like to place on record our appreciation to the legislators especially the distinguished senators for the bi-partisan co-operation, the generosity of time placed at our disposal and by extension the entire country during the confirmation hearings.
As Members of the executive arm we will need more of these type of co-operation to plan our strategy, and get their approvals as may be required; and will give as much co-operation as we can.
Finally it would be re-miss of all of us, permanent secretaries and ministers recently appointed to these merged ministries not to acknowledge and express appreciation for the groundswell of popular support and prayers that have followed the announcement of our appointments.
We understand the burden of your expectations and we pledge to work very hard not to let you, our principal, our country or indeed ourselves down.
Thank you for listening.
Babatunde Raji Fashola, SAN
Honourable Minister of Power, Works & Housing