Power Sector Corruption And The Nigerian Economy | Independent Newspapers Limited
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Power Sector Corruption And The Nigerian Economy

Posted: Sep 15, 2015 at 4:01 am   /   by   /   comments (0)

In this report, second of five parts, Sola Alabadan, Apata Oyeniran, Bamidele Ogunwusi, Nkasiobi Oluikpe and Ikechi Nzeako, trace how corruption in the power sector has succeeded in grounding the nation’s economy, especially, the real sector of the economy.

Nigerians Call For Constant Power Supply

On her part, a civil servant in Lagos, who did not want her name mention in the print, stated that Nigeria has witnessed series of probes in the past and nothing has been done. Therefore, since the sector has picked up to some extent, let the government just consolidate on the improvement of the power sector. She, however, called on the government not to embark on any further probe knowing full well that it will not implement the outcome.”

Analysts observe that the privatisation of the power sector in Nigeria notwithstanding, the country has yet to provide steady power supply.

They note that steady electricity supply is crucial to industrial development of any country, especially Nigeria that is planning to become one of the best economies in the world by 2020.

In their opinions, steady power supply will also reduce cost of manufacturing and other domestic services.

According to them, uninterrupted power supply will guarantee investments, employments for teeming unemployed graduates and reduce poverty level, among other developments.

Stressing the importance of steady power supply to development, most Nigerians believe that the provision of stable power supply is the most important dividends of democracy any administrations can accomplish.

Perceptive observers also recall that past administrations, since independence, have spent a lot of money on power projects without much result.

They note that the Federal Government spent more than three billion dollars between 1999 and 2007 on National Integrated Power Project.

According to them, the recent full privatisation and unbundling of the Power Holding Company of Nigeria by the immediate-past administration have also not guaranteed steady power supply.

In an effort to make power sector effective, the Federal Government insists that it has signed a Memorandum of Understanding with Firstgate Business Intermediaries Limited and its South Korean technical partners, to construct 1,000 megawatts solar plant in the country.

Former Minister of Power, Chinedu Nebo, who signed on behalf of the Federal Government at that time, said about two billion dollars would be needed to have an operational 1,000 megawatts thermal power plant.

He gave an assurance that the company promised that it would build the plant in line with the agreement.

Nebo said that the government would work towards assisting the investors on facilitating the project, especially to acquire the Power Purchase Agreement and other documents.

Mr. Kelvin Asogwa, the chairman of the company, said that the company was also collaborating with local banks for the projects.

He noted that the company had reputable technical partners from Turkey that had handled similar projects.

He recalled that the company had an agreement with the government of Kogi to build a solar farm on 2,700 hectares of land.

In the same vein, the Federal Government says it has also signed another agreement with Solius NGPC, Peoples Home Association and Solar Force Nigeria Limited to ensure steady power supply.

Mrs. Patricia Deworitshe, Assistant Director in the Ministry of Power, in a statement recently, noted that the agreement was to inject another 1,000 megawatts into the national grid.

She, nonetheless, explained that the company would start with 100 megawatts in any location as recommended by the ministry.

Mr. Rasaki Porbeni, the Chief Operating Officer, Peoples Home Association, said that the company planned to establish Solar Research Centres in some universities across the country to generate 10,000 jobs for Nigerians.

“Under the agreement, Solar Force Company will also produce one megawatt each of solar energy to 200 different villages in six different states of the federation,” he said.

These initiatives notwithstanding, observers note that Nigeria’s total electricity generation dropped from 4,500 megawatts to 2,800 megawatts within a year.

Giving further details, Godknows Igali, the Permanent Secretary in the Federal Ministry of Power, said that the power output dropped from 4,500 megawatts on April 3, to 2,800 megawatts on March 30.

He blamed the drop on the vandalisation of gas pipelines and called for increased protection of Nigeria’s power infrastructure.

He also said that the ministry of power was working more closely with appropriate security agencies to adequately protect power infrastructure across the country.

Besides tackling the vandalisation of gas pipelines, observers express concern about the decision of some of the electricity distributions companies to pull out from the privatisation programme of the power sector.

For instance, the Integrated Energy Distribution and Marketing Company (IEDM) gave security challenge in some parts of the country as an excuse for its decision to withdraw from the exercise.

In the same vein, eight other distribution companies have also threatened to withdraw on the grounds that the electricity tariff is low.

Further to this, the Bureau for Public Enterprises has approved the payment of N29.2 billion to the IEDM in a share buy-back deal.

Stakeholders in the sector, however, insist that the challenges facing the country’s power sector can only be overcome with proper pricing of electricity.

Mr. Kola Adesina, the Chairman, Egbin Power Plc, Lagos, expressed similar opinion, insisting that the power supply would be more stable in the country if the price of the product is right.

He made the observation recently in Lagos during the launch of a book entitled: “The Development of the Nigerian Electric Power System (1973-1990).”

“The electricity sector is fundamentally flawed and it needs to be dealt with squarely. The price has to be right for any investor to make it in the sector; it can only be profitable if the customers are satisfied with the supply. Consumers’ satisfaction could be possible if only the product is readily available; and the product can also be readily available if the price is right,” he said.

However, President Muhammadu Buhari has assured Nigerians that his administration would improve on electricity generation.

He said in his inaugural speech that there was no other better ways to explain Nigerian’s poor economic performance over the years than the power situation.

“It is a national shame that an economy of 180 million generates only 4,000 megawatts and distribute

The Real Sector Exposure

The real sector of the Nigerian as it is in other countries is where goods and services are produced through the combined utilisation of raw materials and other production factors such as labour, land and capital. It, therefore, forms the main driving force of any economy, and the engine of economic growth and development. And for the real sector to thrive, it must be supplied with adequate electricity.

As we said earlier, the real sector is the main driving force of any economy, and the engine of economic growth and development; therefore, the development in the real sector is used to measure the level of development an economy has attained and that is why the sector is usually given pride of place in the scheme of things. However, the real sector in Nigeria has suffered because of the corruption that has permeated all sectors of the Nigerian economy, not least the real sector. Given the fact the sector cannot subsist in isolation and has to depend on the quantum of power available in the country, and given that all facets of the Nigerian society are riddled with corruption, including the power sector, the sector has suffered because of the negative impact of corruption in the power sector.

Indeed, most Nigerians agreed that it is the impact of the corrupt practices in the power sector on this all-important sector of the economy that has marred the development of the nation.

However, in the last 40 years, corruption has become the most single cankerworm that has eaten deep into the fabrics of the Nigerian state and society. It has become so deep-rooted and pervaded in the nation that it has now appeared to become a permanent feature of the Nigerian polity and it has become completely institutionalised, and entered into the realm of country’s culture and the value system.

Corruption has become the rule rather than the exception and anyone who refuses to take part in corrupting the system is seen as a fool or an idiot who should be persecuted and hounded out of the system.

Nigeria is a country that endowed with both in human and mineral resources but it is ridden with underdevelopment in perpetuity as a result of corruption and corruption in the country has not spared the real sector of the economy and it has become endemic and that has critically skewed and hobbled growth and development of the real sector in Nigeria. It remains a long-time major political and economic challenge for Nigerians

But the worst impact of corruption on Nigeria is that it led to a reduction in economic growth and development by lowering incentives to invest in the real sector of the economy.  Corruption has also led to a divestment in the Nigerian economy, especially in the real sector.

According to James Adebayo, a Lagos-based entrepreneur, “investment is a coward and takes flight from wherever there is corruption and serious investors are always wary of offering bribes before being allowed investment rights or operational licences”.

This, he said, is because that there are no guarantee that bribed officials would keep their side of the agreement, and with no official cover in case of contract breach, the fleeced investor is left without a cover.  It is a fact that foreign investors have withdrawn their capital from the country because of high incidence of corruption because the risk involved in doing business sometimes outweighs the benefits. Although corruption provides both local and foreign investors the leverage to surmount bureaucratic impediments, yet the number of such successful deals is a far cry from the avalanche of investors that have been ripped off their hard earned money.

According to Ibrahim Ayo, another entrepreneur based in Lagos, corruption has altered the pattern of government expenditure, adding that experience in Nigeria has shown that officials throw government funds more into large and hard-to-manage projects, such as airports or highways than on social services like health and education.

He argued that corruption has become a stumbling block to people enjoying the social fruits of good governance. He argued that corruption contributes immensely to inhibition of growth and development and that it negatively affects investment and economic growth, which is detrimental to national development in the real sector.

“As corruption discourages investment, limits economic growth and alters the composition of government spending, it automatically hinders and reduces future growth in the real sector of the economy and sustainable development”, Ibrahim added.

One of the biggest impacts of corruption is that it rubbishes the image of the country and reduces the quantum foreign direct investment into the nation.

In Nigeria, limited resources that are initially allocated for industries, hospitals, road construction, schools and other infrastructure are either out rightly siphoned, embezzled, misappropriated, or otherwise severely depleted through kickbacks and over invoicing by government officials.

Corruption in the power has severely reduce the quantum of electricity that is supplied to Nigerian companies and Nigerian-based companies.

The negative impact of corruption has not escaped companies that would contribute to increasing the available supply of electricity in the county. For instance, Ajaokuta, a steel mill in Kogi State, was expected to supply thousands of mega watts to the national grid, has been under construction for more than two decades and throughout that period of time has consumed seven billion dollars. It has produced no steel.

Another example is Alscon upper block (an aluminum plant in Akwa Ibom State, which was also slated to produce thousands of mega watts to the national grid) has consumed billions of dollars over the five years.


Big companies that were employing that thousands of Nigerians and paying billions of naira in taxes have either left the country for neighbouring countries such as Ghana and Ivory Coast or have shut down their operations because of corruption in the sector that have impacted the real sector negatively.

Some are still doing business in the country but are doing so at below installed capacity.

For instance, Dunlop plc, a major tyre manufacturing company had to leave the country and relocate to Ghana due to the rising cost of production that was traceable to the energy crisis in the country.

Another major tyre major company that left the country as a result of the power crisis and corruption in the country was Michelin. The company said it left the country because it could no longer generate enough electricity on its own to power its production. However, there are reports that Michelin has staged a comeback to the country. But many of these companies that left the country are yet to return and the country is the worst for it.

High Cost Of Production

One significant negative impact of corruption in Nigeria’s power sector was the increasing cost of production for companies in the real sector, leading to under-utilisation of installed capacity, low utilisation of the workforce, slow growth and eventually low profit.

Indeed, there is a negative correlation between levels of corruption and economic growth thereby making it difficult for Nigeria’s real sector to develop fast.