With the sale of electricity generation and distribution companies to private companies, the focus in Nigeria’s beleaguered power sector necessarily shifts to the regulator of this all-important sector. Dr. Sam Amadi, chairman of the Nigerian Electricity Regulatory Commission, sat down for a wide-ranging interview about the sector, his commission, and his other engagements.
Interview: Waziri Adio and Joshua Ocheja
Photography: Simi Vijah
What will you say are the major achievements of the commission under your watch?
I think the commission’s achievements should be measured against its legislative mandate. Our mandate is to create a competitive electricity market in Nigeria. I think we have largely succeeded in this regard. Today, this market has almost all the standard regulations and codes obtainable even in the advanced markets. We have prepared for the coming of the competitive electricity market. We have set all the basic rules, and we have established the required structure.
Our first real challenge was to establish credibility because of the perception about regulatory risk. Today, the commission has achieved some credibility and the perception of regulatory risk in Nigeria has drastically reduced, such that the World Bank and the US Nexim Bank have acclaimed the NERC mode of regulation as credible, efficient and transparent. Recently, we also got an award from the committee for reform of government by the House of Representatives as the most FOI-compliant and transparent organisation in Nigeria. Our processes are very transparent, open and collaborative with stakeholders. All our rules are made publicly; we advertise them and also go for public hearing. So in terms of governance, we score high.
In terms of effectiveness, are the substances of our interventions able to solve the problem? I think the answer is yes because NERC’s interventions have been effective, well accepted and well-thought-out. The key thing is that we are shaping this market. Mind you, there is no electricity market in Nigeria yet. Industry is different from market. If you build plants etc., you have an industry but a market is where you have clear rules that attract investments and sustain them. This is what we are creating with our work.
Also, if you look at the licensing that we have had and the possibility of capacity increase in this market, you can expect that in the next three to four years there will be constant increase in capacity on a yearly basis of about 3000 megawatts because of how we have worked closely with the licensees and how we have secured the commercial viability of the industry. So today we have at least 20,000 megawatts licensed power. The expectation is that if we go on this way we could deliver adequate electricity.
What does 20,000 megawatts licenced power mean?
It means the entities we have licensed are authorized to generate 20, 000 megawatts. But what they will deliver to the market is uncertain and depends on how each of them manages its operations. The process is that they will bring a business proposal stating what and how they intend to go about it. So those ones are reviewed and approved. But if they go to source for money and the bankers ask about who the off-taker is and the off-taker has not yet signed with them, they will have to wait.
There are standard issues with regulation, including regulatory capture, regulatory independence, over and under regulation, and adequate regulatory capacity. How is NERC positioned to deal effectively with all these issues?
Yes, we are mindful of most of these things. To tackle issue of capture, one of the very first things we did was to design a code of conduct for commissioners and staff. We were one of the first agencies to swear to a code of conduct. We did this in the presence of the representatives of the Minister of Power, the Attorney General of the Federation etc. This is also why we fully signed up to the FOI Act. We also realised to we need to provide job satisfaction and make our staff comfortable. We have established a comprehensive mortgage policy for our staff because we believe that owning houses should reduce the temptations of corruption. We have also established a gift declaration policy, where any gift item above N25, 000 given to our staff has to be officially declared and entered in the gift register. This applies to all, including myself.
We are also doing a lot on training for effectiveness because it’s not only about being ethical. We want to have the best possible staffing. We have in so doing enhanced the capacity of our staff and the result is that everywhere they go, the operators respect the competence of our staff. The first thing I did when I came in was to introduce the distinguished visitors programme and the chairman’s brown bag sessions. These are learning platforms and we have the NERC fellowship to enhance the knowledge base of the staff because we want to be at the cutting-edge of the sector. We are generous in sponsoring capacity building for staff. We are also generous in bringing experts to come and speak on these various platforms. We have seen the results. We can pride ourselves as one of the smartest regulators in Africa.
Then on the issue of independence, I am passionate about it. I have refused to embed NERC in any framework that could compromise its independence. The idea of a regulator for me is the one who works with all stakeholders to achieve results, but critically distances itself to second-guess outcomes. So whereas we are one government and we sit on the table with other agencies, we also make it clear that whatever comes out of that roundtable will be subjected to further reflection for us to see if it is not something that will undermine competitiveness and efficiency in the sector. So we have been a critical voice because the work of a regulator is to flag situations that might compromise public interest. We also need to work with operators in good faith. So if there are problems, we sit with them and get facts and inputs from them. But this is not a substitute for our independent reflections of those facts. So we get the facts on how our regulations are impacting on them, and sit back and review. But we do not substitute their opinion for ours or our opinion for theirs. We go back and reflect and come to a decision which we think is fair to them and fair to the public.
So it’s a matter of independence and accountability on two sides. We are not just independent or just crave independence. We crave accountability. We are accountable to stakeholders, the National Assembly, the Presidency, to consumers and all stakeholders. That was why during the last tariff issue, I put out in a press statement to the organised civil society that if they do have concerns they should put it in a petition and our business rules allow that 30 days after every order, anybody who claims to be affected is entitled to write a petition and NERC is bound to review those concerns in the light of new evidence. So we are accountable to consumers and that was why we created a very elaborate dispute-resolution framework that starts with the customers’ complaints unit in the distribution companies up to the Forum Office which was created in a way that is intriguing. We allow representatives of stakeholders in the community, the Manufacturers Association of Nigeria, engineers, industrialists, Consumer Protection Council member, and the civil society member in that community and then they elect their own chairman under a-three year tenure. So their job is that any dispute that is not settled at the consumers’ complaint unit of the operator, they have the responsibility to settle it and whatever they decide, we enforce. So you can see that the framework for handling consumers’ complaints is hinged on the principles of transparency and accountability. It’s like a jury where people’s cases are resolved by customers like themselves.
What’s the risk of negotiating independence as government appointed people and as people who work with other government agencies?
The notion of a regulator in the electricity industry is new coming and the resistance exists. There is also the idea of ‘how can what we created be independent of us?’ I think the most important thing is credibility.
In that negotiation, where does political management come in?
The political management part is that you have to be a carrier of bad news with grace. You have to find a way to tell government that you cannot do what it sometimes wants done and make it understands why it shouldn’t do it and make it understand that it’s in its ultimate interest not to do what it would have loved to do. So there are two areas of management. You have to manage your engagement in a way that perception of why you are acting is clear and not that you just want to enhance your power against other government institutions. That you are not acting because you have been compromised or bought over by some other interest groups.
So the first is credibility and the second is the management of loyalty and respect. You have to show that you respect government as an institution and at the same time that it’s your responsibility to uphold government policy positions for the ultimate public interest. So there is no science about it. It’s an art and it depends on the actors involved. But happily in this industry we have leaders who are committed to the work of NERC and that make it easier for us.
You have a mandate to attract private investors and also the mandate to protect consumers. But there is this perception that NERC is more interested in making the industry attractive for investors than making sure that the interest of consumers are protected. How do you walk the fine line and is it possible to strike a balance?
What consumers see as pro-business style is actually pro-consumer. For too long, consumers have been in darkness. They are paying and they are not getting value. Even if they don’t pay any tariff, they are not better off because they will still be buying power supply through other means at a higher cost. Ultimately the most fundamental right of every Nigerian is to have power supply. But for us as a regulator, this is not a populist game. Regulation is about problem solving. The problem is: how do you create the product? There is limited electricity supply, and government cannot finance it. In fact, it is government’s investment and involvement that actually created the crisis in the first place. I understand consumers’ concerns but ultimately as a regulator, and sitting here and even if I am the most rabid populist and the leader of the Nigerian Labour Congress and if I mean well for the society and the workers, I would know that improving the commercial viability of the sector is step number one to guaranteeing any improvement in service for consumers.
We know that people are saying, ‘fine, we will pay more when there is improvement in power supply.’ But the question is: how will there be improvement? Improvement will only come by investment. Even if you don’t sell the assets to people in the private sector, those running the entities must be able to use that money to provide those transformers that are broken down, feeder pillars that are not working or reinforce the over-loaded transformers in places where light is erratic. The critical point is you need funds to finance improvement, maintenance and expansion, and this cannot come from government. The only way it can be sustainable is a pricing methodology that provides certainty of investments but not at a cost that is prohibitive. My challenge to civil society groups is for them to get organised and speak with one voice.
What I think we need to do going forward is to institute a system for democratic regulation where consumers’ interests are in a qualitative manner factored in the calculation. And that will happen if the funders can finance a strong consumer advocacy group in the electricity sector. So that when we call for public-hearing, people will come with well-reasoned and researched papers and not just with rhetoric and anger.
But you know that there is a power asymmetry there. The private sector operators have all the resources and the incentives to do the research, to be better organised…
Government can as well sponsor that, and that is what NERC is proposing with the Ministry of Power and the civil society groups. We want public funding for consumers’ advisory advocate. In one of the states in the US, they have a statutory consumers’ group. So there, you have the regulator, the operators and the consumers’ advisory advocate with clear processes that require things to go through them. And that requires them to be mandatory interveners’ in issues of tariffs and regulations. As we go into the new market, we need to ensure that consumers will be well protected.
There is a school of thought that labour unions and civil society groups are major obstacles to reforms in the sector. What’s your take on that and what is your strategy for overcoming resistance?
Well, labour and the civil society groups have not been problems to NERC. Yes, labour spoke about the tariff increase, but it is expected that a labour union will not give support to an increase in price even if it is reasonable and necessary. I think we should understand labour’s activities within a certain ideological framework.
Having said, I think labour has been a problem to the reform generally in terms of the workers in the sector. I think government should have taken the view that the only beneficiary in the darkness is the workers in PHCN. So paying them a hefty pay packet to disengage them in my view wasn’t a good strategy. I would have preferred that labour be paid less to free up money for investments in the sector. I think this will now come down as one of the most expensive disengagements in history. It is too expensive because of labour’s insistence and obstructive tactics. My view is that government was right to try to sort out labour in a peaceful manner. But I think labour got the better edge in that process and held the process down for too long and extracted maybe disproportionate outcomes from the negotiations.
It is widely believed that the next big sector after telecoms is electricity. How big do you think this industry will be?
I think this industry will be bigger than telecoms in the next five to ten years. No doubt about that. By the time you are trading electricity of say 20,000 megawatts, it has far outstripped the telecoms industry. Think about the additional jobs and additional incomes that will come from increased investments in power sector. Then, think about how improved power will galvanize entrepreneurship and production. Think about the impact on GDP growth.
The power sector is a much more comprehensive public good in terms of welfare, health and education outcomes and other variables. And of course the economy grows. As a fact, an additional 10,000 megawatts in Nigeria can grow the economy by two digits, all things being equal.
You wrote an article sometime ago gloating about the increase in power generation to 4517 megawatts. You gloated and power generation dropped…
Well it’s not a case of gloating. We were right because the benchmark we used was correct. You see, the truth is the drop wasn’t systemic. We can pride ourselves that we estimated how the growth can happen and it happened that way. But we are not in charge of security.
So why gloat about something you don’t have control over?
It is the incentives that we create that make the operators generate. What we did was to make predictions about what will happen if the market is stable. This is important for investors because they want to know how the market is faring. We are saying ‘trust us, the market is reliable.’ And that is important because the investor will trust us if our judgement on inflation rates and growth, gas rate, capacity growth is correct. That’s what will guide their investment decisions. The other ones are political risks that are indemnified through a World Bank partial risk guarantee or through the bulk traders’ power purchase agreement.
You also wrote another article titled ‘It’s Time to Think,’ calling on academics and civil groups to be more problem-solving. The point is are you not going off grid by getting into areas that are not about electricity regulation? Or do you feel the pressure that as a ‘Jonathanian’ you have to wade into public debates?
Well, let me put it this way: I believe in public leadership and that public officers must champion ideas. We are a country in transition and I will say that our ideas today have run their course. This country is begging for new ideas. And what’s the next new big idea? I am not enough an intellectual to say this is the next big idea. But we are in that conversation. That’s my own style. There are public officers who believe that they are not supposed to be heard except on very bland memos. I believe that public leadership is influence and from an idea point of view you have to enter into the discussion and shape the discourse.
Are you then not dragging an important regulator into the political arena?
No. It’s not politics. For example the reason why I started the NERC fellowship and the distinguished visitors’ programme is that I believe that the answer to the energy crisis in Nigeria is not just in technical issues. They are also in what I call adaptive issues. For example, we are talking about the future but do we have a thinking culture that is embedded in our institutions that will solve problems in a creative way? Do we have a structure that allows people to brainstorm? This is my belief: we should expand the conversation.
Since 2004, you have been in public life. Why is the public sector so important to you?
I think the public sector is an important sector depending on your temperament. If you have a temperament of matching ideas with action in the public arena, you could find public sector work interesting. It has risks and constraints. But if you succeed in establishing credibility and political support, you have the opportunity of making lasting changes.
The public sector is like the air-traffic controller of other sectors. The private sector relies on the public sector to set up the incentives. The non-profit sector, even though it is non-governmental, is dependent on the character of the government to shape its interventions. So, the public sector is a very strong arena for change and changes that are made in the public sector have greater prospect of sustenance because they feed the other sectors.
For me, maybe it is a matter of fate and also a matter of expertise and training. As a private sector lawyer focusing largely on constitutional/human rights administration, you come in contact with the public sector. And the moment we started thinking about interventions, talking about new prison law and police acts, etc., we got interested in public work. There are two ways that can be done: either as a private lawyer or a private consultant interfacing the public sector.
When I went to Harvard Law School and studied law in detail I think I got interested in the Public Law and then Kennedy School really did it for me. Why did I go to Kennedy School? I figured that my skills and interest were tending towards public sector. I was an occasional writer criticizing government and saying things should have worked better. So I thought probably my combination of temperament, personality, ethics will enable me succeed in doing a few of those things. So my coming to the public sector and staying there is because I find it compelling and attractive in terms of how it harmonises the various skills that we have acquired in school and in the private sector.
My experience has been a mixed bag. I think that public sector leadership provides the best learning in life. It shows you your shortcomings as a person and shows you clearly the shortcomings of your ideas. I have seen these three years of active leadership in public sector as a huge school.
How has your civil society background helped or hindered your public sector work?
It has helped more than hindered because it gave me a very developed sense of interests in the society. I understand the dialectics of regulatory capture. My work with Gani Fawehinmi had seasoned me in understanding how the rich buy public policy against the poor. Everything we have done here has pushed very strongly at transparency. I could not have made NERC one of the most transparent organisations if I was not dealing from the human rights/civil society perspective.
There are three kinds of civil society people. There are those who are in civil society because they were looking for a job and when they find it they have to act the role. There are those who have a psychology of irreverence—so they are angry, resentful people and civil society seems to mean attacking the government. But there are those who believe in the values that civil society requires. They believe in equality, dignity and fairness. I think I belong to this group. Coming here, I continue to live by those standards. There are many civil society people that come into government and change overnight. In my own view, I have maintained a consistent idea system. The applications can be faulted, but I have not compromised the things I believe about society.
You have other engagements: coordinating the cleaning of your church, writing occasionally and mentoring young people. Why are all these things important to you and how do you cope?I do them because they are self-reinforcing. The idea of being a regulator is to protect public interests. Writing is a way of expression for me, even though sometimes it is incorrect to write when you are in public office. It is an urge to throw light on issues. Writing is derived from the impulse of seeking public good. Church activities are based on the understanding of who you are to God and to other people. I even see human rights activity as a religious one. The idea of my relationship with God is central and determinant of other ideas. Because I believe in God, I have to be ethical and fair.
No comments:
Post a Comment