Recent media reports that the Presidency has cancelled the contract for the management of the Transmission Company of Nigeria, a contract it entered with the Canadian firm, Manitoba Hydro International, reveals a major hiccup in the power sector reform programme.
Presidential spokesman, Reuben Abati, stated that the cancellation of the contract signed in July 2012 was based on the lack of due process on the part of the Bureau of Public Enterprises. The government had earlier declared Manitoba as the preferred bidder.
The management contract worth $24m was geared to turn around the fortunes of the TCN while the Federal Government retained its ownership and funding. Manitoba was scheduled to take over TCN on September 1, 2012 but the take-over did not happen.
However, a few days after the reported cancellation, the media further reported that the Presidency was merely considering the process that led to the management contract and that no decision had been taken.
First, it was the employees of the Power Holding Company of Nigeria who resisted the take-over by Manitoba in accordance with the terms of the contract. Manitoba’s tasks under the contract include, inter alia, the functions of a market operator, systems operator and transmission service provider.
It is a matter of public knowledge that entrenched interests in the system, especially the workers, have been resisting the power sector reforms, especially the privatisation and management contract processes.
Second, bureaucrats who have been feeding fat on the system have also been in opposition to the management contract. Don Priestman, the chief executive officer of Manitoba, had recently disclosed to the media that two months into the commencement of the management contract, Manitoba had yet to receive the full authority to begin work at the company. Officials of the TCN and the Ministry of Power were busy singing a different tune as they could not justify the delay in handing over the management of the company to Manitoba.
Indeed, the ministry wanted Manitoba to focus on the technical aspects of the job, leaving revenue issues and personnel to them. This would have meant the continuation of business as usual. Apparently, the exit of the reform-minded Bath Nnaji as Minister of Power had allowed the retrogressive bureaucrats and workers to regain momentum and mainstream their opposition to the contract.
The delay in handing over the TCN to Manitoba by the Ministry of Power since September had now been shown to be a ploy to buy time to plan for the repudiation of the contract.
Further, the Bureau of Public Procurement had charged the BPE with mis-procuring the Manitoba contract. Section 55 of the Public Procurement Act of 2007, dealing with disposal of public properties, makes it clear that the Section shall apply subject to the provisions of the Public Enterprises (Privatisation and Commercialisation) Act of 1998.
Upon all known canons of legal construction, the task of finding a management contractor for the TCN lies squarely with the BPE. So, where is the due process failure? If there is any failure, the facts have not been laid bare to the public.
It appears that there is a turf war between the Federal Government agencies and this protection of turf cannot be in the public interest. This raises the poser: What exactly informed the purported cancellation of the management contract?
Further, it is a matter of fact that the Electric Power Sector Reform Act of 2005 makes it clear that private sector efficiencies must be introduced into virtually all the segments of the power sector. This has been reinforced by the Power Sector Roadmap of the Goodluck Jonathan administration.
The Roadmap sought to set timelines and deepen the provisions of the Act by providing a clear and structured approach to resolving the challenges besetting the power sector. Virtually all the timelines for the achievement of key targets have been missed.
Earlier, the National Economic Empowerment and Development Strategy, NEEDS, of the President Olusegun Obasanjo administration had set milestones and timelines for the improvement of electricity services.
Also, all the timelines and milestones were missed after several billions of dollars had been spent. It is on record that it took Nigeria about five years to conclude the process of choosing a management contractor for the TCN.
There are a number of implications if this cancellation holds. The first is that it will be a big setback for the electricity reform process. It will be illogical to have privatised generating and distribution systems while the TCN drags back the system with its inefficiencies and bottlenecks. A process that took five years to conclude will definitely not produce a new management contractor in six months.
The second issue is that Nigeria will definitely be made to pay some compensation to Manitoba which can effectively claim to have suffered loss. And the compensation will be made from the public purse.
The third issue is that it will affect the readiness and willingness of investors to start and continue investments in the emergent private sector entities. The cancellation is a bad precedent and as such investors who do not pull out of the reform process will require double assurance to ensure that their contracts will not be repudiated after incurring heavy costs.
The fourth is that the government is portraying itself as irresponsible. For a contract concluded and signed-off between the Bureau of Public Enterprises and the National Council on Privatisation to be seen to have serious pitfalls and lacking in due process is a big dent on the image of the administration. It is imperative to recall that the Vice-President of the Federal Republic of Nigeria presides over the National Council on Privatisation!
For President Goodluck Jonathan, it is important that he is made to know that one of the cardinal parametres that will be used to determine the success or failure of his administration is the power sector reforms. It is therefore not in his interest to continue to allow unnecessary policy reversals. The public officers advising in favour of this cancellation would not necessarily be blamed when the reforms fail but it is the President who will definitely take the blame because the buck stops at his desk.
There is little or no time left and Nigerians cannot continue to be guinea pigs of an endless experiment and turf war by bureaucrats who have not considered the suffering of the masses.
Finally, the failure to find a suitable replacement for Nnaji some months after his resignation shows that the President’s acceptance of his resignation (or asking him to resign) was not well-thought out. Such highly skilled and knowledgeable men are in short supply in Nigeria and you cannot definitely find a replacement over the counter.
Even the commitment and passion he brought to the electricity reforms table is no longer available to the nation. There was nothing stopping the President from asking Nnaji to stop any further participation in the privatisation process and disqualify companies that had any link with him while allowing him to continue serving the nation.
If Nnaji had still been the Minister for Power, this unfortunate challenge leading to the cancellation of Manitoba’s contract would not have arisen. The President must act fast to stabilise the power sector reforms.