Home Contracts and Procurement Re-Yar’Adua, Obasanjo and Power Sector’- My Story of Nigeria’s $16billion Power...

Re-Yar’Adua, Obasanjo and Power Sector’- My Story of Nigeria’s $16billion Power project

(This publication was First published on Thursday, July 21, 2011 By Late Engr. Foluseke Somolu)

“I write with regards to the column by Mr. Olusegun Adeniyi titled ‘Yar’Adua, Obasanjo and Power Sector’ which appeared on the back page of the 7th July 2011. Segun mentioned that one major problem the late President Umaru Musa Yar’Adua had was that his predecessor, President Olusegun Obasanjo did not give him a hand-over note, especially as concerned the power sector. While I confess that I do not know what form handover notes from one president to another takes (or should take) I am aware, however, that in the period between his election and the actual swearing in date, all government departments, ministries, parastatals, etc. made presentations to President-elect Yar’ Adua on their activities, structure, on-going projects, funding, what problems there were, etc.

In addition to the presentation, they also submitted written reports, with then President Obasanjo in attendance and directing affairs. Questions were asked and clarifications made as necessary. I am not sure Segun had assumed duties at this time. Furthermore, shortly after resuming as President, apart from the presentation to him by Engr. Makoju, I, as coordinator of NIPP, also gave the new President a presentation on the NIPP. So I am convinced Yar’Adua had enough opportunities to get as much information about the sector as he would want, and to further continue to seek clarification as he needed.

President Yar’adua’s confusion as to the role of GE, as reported by Segun, did not need arise at all. NIPP consisted of contracts with companies in their areas of strength and comparative advantage. GE builds and sell generators and gas turbines and they were contracted to supply all the generators and gas turbines for the NIPP. They also had contracts to supply technical support for installation and commissioning to the respective Engineering-Procurement-and-Construction (EPC) contractors for all the power stations under the NIPP as well as the long-term service on the units.

Segun also gives the impression of apparent total confusion in the concept and implementation of the NIPP project, mentioning the non-availability of gas pipelines and gas, inadequacy of road bridges, etc. as examples. This is not the case. All these challenges mentioned are routine in power projects and are routinely overcome.

In the case of NIPP, where gas pipelines and/or additional gas were required were identified before hand and contracts were awarded (or in the process of being awarded) for the pipelines when Yar’Adua got in charge. Negotiations were also held with NNPC and the oil companies and assurances were given that there would be gas when the power stations would be ready. Slips do occur when two parastatals are cooperating on a project. For example, Egbin power station was commissioned in 1986/87 almost two years before the gas pipeline from Utorogu to Lagos was completed. Something like this almost happened too when Olorunsogo (a.k.a Papalanto) was commissioned because the gas pipeline installation was still in progress, but NNPC were able to deliver gas from their pipeline feeding WAPCO’s cement plant at Ewekoro. And that arrangement remained in place for quite some months after that.

The suggestion by Segun that a tanker was used to deliver LPG for the commissioning is preposterous. A typical NEPA gas turbine consumes an average of between ten and twenty-five million standard cubic feet of natural gas per day at a pressure well above fifteen bars. Use of tankers could not meet up with this rate of consumption and delivery pressure.

As for the inadequacy of some bridges to support the weight of turbine generators crossing over them and ferrying by barge having to be resorted to, again this is not such a strange situation and it is a problem that is being solved every time a power station has been built inland in Nigeria, beginning from Kainji (1968) through Shiroro, and Jebba (early 1980’s), Geregu (2006), etc. when railway was used where available, and some sections of road had to be improved and bridges reinforced to allow road transportation. Hard and fast provisions were not made in the NIPP contracts because the condition of roads and bridges change all the time and roads and bridges that may be okay or nearly so may deteriorate drastically between tender submission and contract award and implementation.

Contractors are therefore usually wary about making firm commitments on such details. The provisional sums to meet such incidental expenses as these would entail were included in the contingencies sum in the funds approved for the NIPP project management which unfortunately was not released to the project team by the time the generators started arriving because of Yar’Adua’s hesitancy.

True, the gas turbines arrived well ahead of the site works completion. This was because there was a huge worldwide demand for gas turbines at the time the contracts were awarded and all reputable manufacturers all over the world had very long queues and tight delivery schedules. GE had a window in their manufacturing programmes at that time, and it was either we took advantage of it or be prepared to wait years to be served. If the disruptions of the Yar’Adua era did not take place, the units would have been delivered to respective sites where GE had contractual obligation for regular inspection and preservation pending their installation and commissioning instead of being left at the ports.

The controversy over how much had actually been expended on the NIPP did not need arise at all. Yar’Adua had access to all the people who would have given him the true picture if he would believe them. He should have known that telling the world (and Nigerians) that $10 billion had been expended on power projects and “there was nothing to show for it” would raise the type of reaction he got. There is a huge difference between $10 billion and $5 billion. And if the functional available generating capacity in the country was raised from about 1500MW (15 available generating units) in 2000 to 4000MW (36 available generating units) with constant daily generation above 3000MW from end of 2001 even right up to 2007 when Yar’Adua came, and contracts were in place and being implemented to raise that capacity to about 8000MW with corresponding reinforcement of the transmission and distribution networks to all states of the country under the NIPP, the $5 billion was more than justified. I find it difficult to see how all these could be swept off as amounting to “nothing to show for the expenditure that had been committed”. And this is more so when the bulk of the $2.2 billion for NIPP was in letters-of-credit opened by the CBN and still then largely not yet drawn down.

Segun claimed that “while Somolu was correct (in his assertion that only $5.1 billion had been spent) so was Yar’Adua who was talking about the general expenditure (a figure that turned out to be more than $10 billion)”. Now what is “general expenditure”? At my “trial” in the president’s office, after Yar’Adua had raised the poser “exactly how much was really spent?” and the Accountant General of the Federation, DanKwabo (current Governor of Gombe State) had given figures identical to mine, the president appeared rattled before other people present – Minister of Finance, Permanent Secretary (Power), and some others – supplied the rest of the so-called general expenditure.

These, according to them, included the amount spent by the oil companies on their joint-venture IPP’s (put at “not less than $2 billion”); the budgetary allocation to Energy Commission of Nigeria (put at “some millions of dollars”); and NEPA’s internally generated revenue (put at “not less than $6 billion). I was amused and angry at the same time. Angry that Yar’Adua was only trying to find out exactly how much had been spent after he had been making his explosive public statement, and amused that he believed those who came to his aid by supplying what were unsubstantiated and unaudited, and irrelevant (in the circumstances) expenditure figures. I wonder why they had not also included all the money Nigerians spend to acquire and run standby generators as part of the “general expenditure on power”.

I negotiated the power purchase agreement for Agip’s Okpai NIPP, the only joint venture IPP then actualized and in operation and knew the cost of their installation was about $500 – $600 million, and NNPC’s share of this cost (which at that time had not been paid) would only be about half of this figure, very far from $2 billion. Including the Energy Commission of Nigeria’s expenses was nonsensical and deliberate falsehood to say the least. The Commission is a research institute and had nothing to do directly with the power sector. Also just as ridiculous was the mention of NEPA’s internally generated revenue in the period which is normally spent to pay staff salaries and other emolument (pension, medicare), offices rental all over the country for marketing units and fault reporting centres, operation-vehicles acquisition and running costs, gas purchases and general maintenance of the system, etc. These expenditures would still have had to be met whether there were new facilities built or not. They are fixed overheads. It is like someone complaining that his under-sized generator cannot carry his house-load despite that he spends so much on maintenance and diesel. Until he buys a bigger generator or additional one, all of his house-load will still remain unserved.

Segun then added that Somolu intervened in a manner that created the impression Yar’ Adua had accused his predecessor of corruption in handling the NIPP. This is not true at all. First I did not make a public statement. I only wrote to the Chief Economic Adviser, Mr Tanimu Yakubu, who had made a presentation when GE visited Yar’Adua that $10 billion had been spent in the power sector and there was nothing to show for it (similar to what Yar’Adua himself said) to tell him the records available to me did not support such assertion, and I supplied a list of all contracts awarded in the power sector by NEPA and the Presidency on NIPP which totaled $5.16 billion. THISDAY newspaper carried my letter verbatim after I was fired by Yar’ Adua (I don’t know their source) on 19th February 2008, and it is clear what I said or what impression I created by my memo.

As for me making an apology for my letter, I did not make any. After all the people at my “trial” had supplied all their spurious figures of “general expenditure in the power sector” showing that the expenditure was “more than the $5.16 billion I had quoted, Yar’Adua then asked what I had to say, I told him I did not see the need for this meeting and that all I would have expected was a reply to my memo pointing out what other expenditures I might not have known about so we could examine their veracity. After all Tanimu and I were colleagues in the Presidency. This made all the people burst out with shouts of “hear what he is saying instead of apologizing”. But I stood my ground since I did not see what there was to apologize about and kept repeating my statement till the President then said the meeting was over and everybody dispersed. Yes I stayed behind to tell the president that it was unfortunate he felt embarrassed about the whole controversy but I assured him my memo could not have been the cause of any press controversy since it was an internal memo. Beyond that I offered no apology for my position. I could not have. There was nothing to apologize for. I knew I was right. The Accountant-General of the Federation confirmed I was right. Even Segun in his column said that much. Why then would I be apologizing?”

• Engr. Somolu was a former Senior Special Assistant to Presidents Obasanjo and Yar’Adua on Power Sector Reform, and Coordinator of NIPP.

May his sweet soul rest in peace.

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