Governors Demand Full Refund for $10bn NIPP Investments

In a move set to shake the foundations of Nigeria’s power sector, state governors have issued a fervent demand for the refund of their equity investments in the $10 billion National Integrated Power Projects (NIPP). This significant development underscores the escalating tensions between state governments and the Federal Government over the management and returns from these critical power assets.

The Demand for Accountability

Under the aegis of the Nigeria Governors’ Forum (NGF), the state governors have presented a comprehensive document to the Federal Ministry of Power. Titled ‘Development of the National Integrated Electricity Policy and Strategic Implementation Plan Policy Recommendations by State Governments,’ the document outlines their demand for not just a refund of their investments but also an equitable rate of return.

“The investments by states in the NDPHC need to be clearly defined. States advocate for a refund by the Federal Government of the states’ full equity investments in the NIPPs plus an equitable rate of return on their investment,” the governors asserted. This demand, if met, could lead to a substantial financial shift, impacting the Federal Government’s ongoing plans to privatize and sell NIPP assets.

The NIPP: A Controversial Legacy

The NIPP was launched in 2004 as a government-led initiative aimed at improving Nigeria’s electricity generation capacity. With an initial seed fund of $2.5 billion and an estimated total outlay of $9 billion, the project has grown to involve investments amounting to approximately $10 billion. Despite this substantial financial commitment, the project has been marred by controversies and allegations of mismanagement.

In August, the Socio-Economic Rights and Accountability Project (SERAP) highlighted the financial opacity surrounding the NIPP, stating, “The Obasanjo administration spent $10 billion on NIPP with no results in terms of increase in power generation. $13.278,937,409.94 was expended on the power sector in eight years while unfunded commitments amounted to $12 billion.”

A Call for Clarity and Equity

The state governors’ demand is not just a financial plea but also a call for clarity and equity in the management of Nigeria’s power sector investments. They argue that there was no transparent valuation of state assets in the successor power distribution companies (Discos) prior to their privatization. Moreover, they claim that state Rural Electrification Boards (REBs) still legally own Disco assets created by state funds, as the Electric Power Sector Reform Act (EPSRA) of 2005 did not nullify the existing REB edicts.

“In addition, existing edicts establishing state Rural Electrification Boards did not cede or transfer the assets created by a state REB to either NEPA (National Electric Power Authority) or the Federal Government,” the governors noted. They further highlighted that states hold greater equity than the Federal Government in the 40% government shareholding in successor Discos based on a 2018 NERC valuation.

The Push for Representation and Control

Beyond financial returns, the governors are pushing for greater control and representation in the management of Discos. They recommend having at least one representative on the boards of successor Discos, which would ensure a more inclusive and participatory decision-making process within the state electricity market. “States recommend that they should have at least one representative on successor Discos’ boards, while the Federal Government also maintains its single board membership,” the governors stated.

This demand aligns with their broader call for the Federal Government to formally recognize the shareholding of states in Discos through a federal gazette and formal notification by the National Council on Privatisation.

Federal Government’s Stance

While the Federal Ministry of Power has confirmed receipt of the governors’ document, there has been no official response to their demands. Bolaji Tunji, the media aide to the Minister of Power, acknowledged the receipt of the document but refrained from commenting on the specific demands. This silence leaves a cloud of uncertainty over the future actions of the Federal Government regarding these substantial financial and policy issues.

Expert Opinions and Legal Implications

Dr. Sam Amadi, the former Chairman of the Nigerian Electricity Regulatory Commission (NERC), offered a nuanced perspective on the governors’ demands. He pointed out that since the NIPP assets are still owned by the three tiers of government, states can continue to hold their equity shares and benefit from returns. However, he acknowledged that if the Federal Government were to take full control of the NIPP assets, the states would have legitimate grounds to demand a refund of their investments.

“If the Federal Government is treating it as a federal concern, now because of the fact that the states are now developing their own electricity markets, it does not mean that there is business failure with the NIPPs. The states can still be equity owners in the plant, receiving returns and getting people to be on the board,” Amadi explained.

The Road Ahead

The governors’ demand for a refund and equitable return on their investments in the NIPP marks a critical juncture in Nigeria’s power sector reforms. With state governments now empowered under the Electricity Act 2023 to operate and regulate their own electricity markets, the dynamics of power generation and distribution in Nigeria are set for significant transformation.

This demand also brings to the fore the broader issues of transparency, equity, and accountability in the management of public investments. As the Federal Government grapples with these demands, the outcome will have far-reaching implications for Nigeria’s power sector, governance, and the relationship between federal and state authorities.

The Privatization Controversy

The controversy surrounding the privatization of NIPP plants further complicates the situation. In December 2022, the Federal Government and states agreed to sell five NIPP plants to raise funds, a move that has been met with mixed reactions. The Bureau of Public Enterprises (BPE) has been at the forefront of these transactions, which are expected to generate significant revenue but have also raised concerns about the valuation and transparency of the sales process.

Conclusion

The governors’ bold demand for a full refund of their investments in the NIPP and an equitable rate of return is a pivotal moment in Nigeria’s power sector narrative. It underscores the urgent need for transparency, accountability, and equitable management of public resources. As the Federal Government and state governors navigate this complex terrain, the decisions made will not only shape the future of Nigeria’s electricity market but also set precedents for federal-state relations and public sector governance in the country.