Inconsistent government policies, high annual turnover and cash flow requirements are currently threatening the execution of the $155 million Phase 2 of Nigeria’s National Mass Metering Programme, (NMMP).
The project is a World Bank-funded 1,250,000 metering scheme targeted at procuring and distributing smart electricity meters to 11 electricity Distribution Companies (DisCos) in the country.
The Muhammadu Buhari administration had intentionally executed the nation’s metering programme to positively promote indigenous production, deepen local capacity, conserve foreign exchange, and create additional one million direct jobs and three million indirect employment opportunities through the granting of import duty waivers and other incentives, targeted at enhancing their operations.
But the current Phase 2 of the NMMP, approved by the Federal Executive Council (FEC) for the supply and installation of 1,250,000 Fully Built Units (FBUs) managed by the Project Implementation Unit (PMU) of the Transmission Company of Nigeria (TCN) and supervised by the Bureau of Public Enterprises (BPE), is structured to favour foreign companies more than the 35 local manufacturers of the product in Nigeria.
The bid guidelines sighted by Vanguard, listed high annual turnover, cash flow, and security bid in dollars as conditions to be met by bidders.
For a bidder to prove its financial capability, the bid stated: “Bidder shall submit last five years audited financial statements, which shall include balance sheets, profit and loss statements, cash flow statements, and auditor’s reports and must demonstrate the current soundness of the bidder’s financial position and indicate its prospective long term profitability.
“Cash flow of Lot 1: $4,465,000; Lot 2: $5,105,000; Lot 3 $5,285,000; Lot 4: $5,885,000; and Lot 5: $4,950,000.
“In case a bidder bids for more than one Lot, then the cash flow requirement shall be added. Bidder must meet above financial capabilities as a single bidder or in case of Joint Venture (existing or intended) each member must meet 30 per cent of the requirement and at least one member must meet 70 per cent of the requirement”.
In terms of turnover, it stated: “Bidder shall have minimum average annual sales revenue (turnover) over the last three years of not less than Lot1: $26,790,000; Lot 2: $30,640,000; Lot 3: $31,707,000; Lot 4: $35,307,000; and Lot 5: $29,695,000.
“In case a bidder bids for more than one lot, then the Minimum Average Annual Turnover (MAAT) requirement shall be added.
“Bidder must meet above MAAT as a single bidder or in case of Joint Venture (existing or intended) each member must meet 30 per cent of the requirement and at least one member must meet 70 per cent of the requirement”.
The bid demands that “the bidder shall demonstrate that it has successfully completed at least two similar contracts within the last five years prior to bid submission deadline, each with a value of at least the value mentioned below for each lot that has been successfully and substantially completed that are similar in nature and complexity to the goods and related services under the contract. For a joint venture, this requirement may be met by all members combined.
“In case a bidder bids for more than one lot, then the project contract value requirement shall be added”.
For a bidder to illustrate its experience and technical capacity, the bid stated that, “The bidder shall have been engaged in the business of manufacturing or in the supply and installation of electricity meters for at least 10 years, supported with documents defining the constitution or legal status, place of registration and principal place of business.
“The bidder shall submit acceptable evidence that demonstrates it has experience of (a) manufacturing and supply of at least 500,000 smart meters and (b) supply of Head End System (HES) of 250,000 over the last five years.
“The bidder shall demonstrate that the items supplied above must have been in successful operation for at least two years by submission of User operation acceptance certificate or letter.
“The bidder should have experience in installation and commissioning of at least 250,000 smart meters, including installation and commissioning of HES”.
Checks by Vanguard indicated that the Local Meter Manufacturers and Assemblers (LMMAs) petitioned the government, arguing that it will be impossible for them to meet the conditions.
The manufacturers noted that the moves by TCN constitute a serious threat to local content development in the power sector, adding that it wiill reverse the gains of backward integration achieved in the past three years.
The indigenous companies also took their case to the High Court, Kano, asking it to, among other things, stop TCN from going on with the process.
It was learnt that the intervention of the Federal Ministry of Finance culminated in a meeting with the ministry of Trade, TCN, Nigerian Electricity Regulatory Commission (NERC), the Bureau of Public Enterprises (BPE), Nigerian Bulk Electricity Trading (NBET) Plc, Debt Management Office (DMO) and members of the LMMAs participating, which also resulted in the formation of an inter-ministerial committee.
The committee was mandated to visit all metre manufacturers and establish their installed capacities and the status of their metre stock while the World Bank was to be engaged to see how the procurement process could be reopened to accommodate the concerns expressed by indigenous producers and assemblers.
It was learned that the association was also convinced to withdraw the suit against TCN and others in the Federal High Court in Kano, thus paving the way for commencement of the visitation committee led by the Ministry of Finance to all metre manufacturers between September 15 and 20, 2023.
The report of the inter-ministerial committee indicated that the indigenous producers have an installed capacity of 4.5 million meters, and that in the country, more than 500,000 meters could be immediately deployed to the market, and another potential order of 500,000 will get to Nigeria within two months.
Meanwhile, the TCN-PMU unit, which was part of the visitation study, reopened the controversial bid process on 21st September 2023, thus disrupting the process followed by others.
TCN Managing Director/CEO, Engr. Sule Abdulaziz did not respond to Vanguard’s request for comments on the various issues, yesterday.
Similarly, the leadership of the association could not be reached, but a source close to the body, said: “Manufacturers are aware of the ongoing programme and have made their response known to government and its agencies”.
However, an advocate of local content, who pleaded anonymity, said: “In fact, for the few local metre manufacturers that bidded, if any of them qualifies, it would be curious to have access to the analysis of how they met the evaluation criteria without sharp manipulations.
“Such a development will undermine best practices in bid qualification and probably explain why some companies undermined the agitation by LMMA for the review of the evaluation guidelines.
“Given the structure and age of the Nigerian metering sector, there is no way a local company can scale the evaluation criteria and compete with foreign companies. Some members of LMMA have vowed to challenge the results arrived at by TCN.
“If TCN was going to unilaterally vary the evaluation criteria, then it should have made this possibility known ahead of bid submission. It is on record that many LMMA obtained registration, but were discouraged from bidding when they reviewed the bid qualification criteria.
“Giving concession to a few local companies to the detriment of those who abided by the published criteria demonstrates the possibility of a prior arrangement, which might have emboldened them to undermine the agitation by the association.
“Be that as it may, it is expedient for government to begin talks with LMMA with the view to honouring the gentleman commitments that led to paving the way for Phase 2 bids to be opened. The idleness of the factories with continuing overheads will create space for further disquiet and unnecessary friction, especially in an environment where the exchange rate is not helping the MAP model”.
“It is also advisable that the Federal Government, its agencies, and others, should embrace and work with local metre manufacturers and off-take existing quantities of metrer available in the nation.
‘’Efforts should also be intensified to revive the Phase 1 mass metering programme, in collaboration with all the key stakeholders”.
