The power sector puzzle of a willing seller and an unwilling buyer

Titi (Power Generation Companies, GenCos) is an akara seller (Electricity Generated), she was approached by Mama Jubril (NBET- the Government appointed bulk buyer and wholesaler who promises to buy the power and provide payment guarantee to the GenCos) who promised to pay for all her akara.

Mama Jubril, further informs Titi that she has willing and capable customers she can sell to (DisCos – who buys from NBET and sells to Nigerian home users and industries) and pay Titi for the one thousand (1000) akaras (All Electricity Generated and put on the Transmission Grid).Titi agrees with Mama Jubril knowing that the Oga at the top (Federal Government, FGN) is behind her and has promised to guarantee and pay for all akara Titi can produce.

In a similar vein, for better transportation arrangement, Mr. Okafor, the van/truck driver(Transmission Company of Nigeria (TCN) managed by FGN) who is responsible for the delivery of the akara was introduced to Titi by the Oga at the top (FGN). Mr. Okafor promised he can deliver (can transmit over 5,000MW of electricity) the akara Titi produces. Titi raised the issue of possible truck failure with Mr Okafor but he vehemently argued that he has several plans in the pipeline to put his truck in place and even increase his capacity to deliver more than what Titi can produce.

Titi, in order to avoid disagreements, insisted that they all sign agreements. She signed agreements with Mama Jubril (Power Purchase Agreement, PPA), Mr Okafor (Transmission Agreement) and the Kerosene or firewood sellers (Gas Sales and Transportation Agreements GSA & GTA). In order not to disappoint Mama Jubril, Titi quickly ran to various banks including UBA, Guarantee Trust, Sterling, and Standard Chartered Bank etc for loan facilities and signed agreements with them.

With all these guarantees from all parties, the loan was given to Titi to enable her buy her ingredients: beans, utensils, frying pan, crayfish, pepper, onions, salt, oil (representing spare parts, lube oil, machine operators, water usage/rights etc.) and firewood or kerosene (Gas), Titi even hired some boys and girls (O&M team, plant operatives, etc.) to help her out for quick and efficient production of the akara.

Titi prepared the one thousand akara (electricity) as agreed, and sent it to Mr Okafor for delivery. Mr Okafor starts complaining of having problems with his truck and that he can only deliver 800 akaras (who pays for the additional 200 akaras already produced?).

Out of the 800 akaras, he carries on behalf of Mama Jubril (NBET) to her customers (DisCos), about 300 akaras were further rejected (power rejection by Distribution Companies, DisCos) because according to them Mr Okafor delivered them to the wrong address. They prefer another address. Mr Okafor, responding to them, said he is a Government driver and can only deliver the akara to the addresses his supervisor (Systems Operator, a Unit under TCN) gave to him.

Deducting 500 from the original 1000 akaras agreed to be produced, that is after the rejection both by Mr Okafor (Transmission) due to his truck condition as well as the akara rejected by Mama Jubril’s customers (DisCos) due to wrong address, of the remaining part sent to Mama Jubril (NBET), she pays whatever she likes, sometimes she pays for 120, 200, 180, 150 or 110 as the case may be.  Mama Jubril’s excuse is that her customers (DisCos) refused to pay her after selling (distributing the electricity generated by GenCos) the akara.

Then on the other hand, Titi’s akara consumers are asking her to produce more because her akara is “one in town” and that she should increase her production to two thousand since the one thousand, she is currently producing is not enough.

Titi (GenCos), loves making akara (Generate more electricity) and wants the economy to improve since her akara (electricity is the lifeblood of the nation) is considered “one in town” and is good for the health of consumers (Nigerians and businesses).

However, like any other business person, Titi is asking for payment of the akara she has supplied and has not been paid for. Mama Jubril (NBET) is blaming the Customers (DisCos) she supplied the akaras to, the Customers on their part (DisCos) are blaming their Consumers (Nigerians, Businesses and Government Offices), Consumers are insisting they are paying for every akara (Electricity) consumed by them.  They are dribbling Titi here and there whilst the Consumers are also blaming her for not producing enough akara!

Titi does not have any direct contract/agreement with Mama Jubril’s customers (DisCos) and should certainly not intrude or be affected by how Mama Jubril decides to sell the akaras she gets from her as she has a wholesale agreement(PPA) with her.

Titi’s business is now going down because she is not able to continue getting loans from the bank to sustain a business where the banks cannot get their interest and/or capital. Titi is finding it almost impossible to keep buying all the ingredients she needs for the Akara business including the kerosene and firewood. Also, Titi is finding it hard to keep her salary commitment to the well trained boys and girls who have been working very hard to keep her business going. Prizes of things have all doubled yet her prize is same, all she asks is full payment of the outstanding.

If you are Titi (GenCos), can you continue to produce more akara (electricity)? Knowing you will not be paid in full? Can you increase the number of akara (Increase Electricity Generation)? Knowing that even the driver (transmission) cannot deliver (transmit) the quantity you are producing? How can you even manage the bank loans? The worker’s salary? Who takes responsibility for the rejected akara (rejected electricity) since Titi cannot store it (considering power cannot be stored)? Who pays for the kerosene and firewood (gas and other materials used in generating) used to prepare the akaras?  Should Titi continue to sell the akara (electricity) to Mama Jubril knowing she is incapable of paying for them? How best can Titi transport her akara to Mama Jubril since Mr Okafor is the only transporter of akara in Nigeria? Since Mr Okafor’s truck is faulty and may not be fixed anytime soon, do you advise Titi to increase her production?

This is the summary of the problems in the Nigerian Electricity Market. Nigerians are very intelligent people, they should decide for themselves, the solution to this conundrum.

Dr Ogaji is the executive secretary, Association of Power Generation Companies