Concerns as Nigeria’s power sector decade privatization deal expires

There are mounting concerns as Nigeria’s power decade privatisation process is expected to elapse on October 31, 2023.

It has become more problematic following the decades-long crisis within Nigeria’s power sector.

For over 62 years, the country’s electricity value chain, from distribution to generation and transmission, has been bedevilled with challenges.

Meanwhile, the government attempted to break the jinx in the country’s ailing power sector, first with the establishment of the defunct 2005 Electric Power Sector Reform (EPSR) Act, then on November 1, 2013, the commencement of the privatisation process.

DAILY POST recalls that the government commenced the privatisation of the Nigerian electricity distribution and generation companies in November 2013, benchmarked on a 10-year moratorium of operational licensees with the hope that the decision would halt the age-long power crisis.

However, a decade later, the problems of the power industry have remained unsolved, becoming a persistent clog in the wheel of progress for Nigeria’s economy.

The electricity distribution companies are battling with liquidity issues and low remittance compounded by the metering gap; still, the generation companies struggle with poor investment and transmission inadequacies, leading to incessant grid collapses.

For years, the country has struggled with 5,000 megawatts of electricity daily for a population of over 200 million people.

According to the Nigerian Electricity Regulatory Commission, NERC, report for the second Quarter of 2023, the 26 power plants’ generation capacity dropped to 4,387.91MW.

Also, regarding the annual capacity payment loss in the sector, the report indicated that in 2015, 2016, 2017 and 2018, the industry’s losses were N214.93bn, N273.32bn, N236.47bn and N264.08bn, respectively. In 2019, 2020, 2021 and 2022 (January – August), the sector’s annual capacity payment losses were N256.97 billion, N266.10 billion, N159.86 billion and N88.13 billion, respectively.

The challenges have lingered despite the government’s intervention at different times.

Recall that on September 30, 2014, the Federal Government announced a loan of N213 billion to the privatised power firms.

Similarly, on March 1, 2017, the Federal Government approved the sum of N701 billion as a power assurance guarantee fund for the Nigerian Bulk Electricity Trading Plc to pay for the electricity produced by the generation companies for two years.

The government also provided another N600 billion payment assurance facility to the sector in 2019; the nation’s power industry has continued to bleed despite these interventions.

The ripple effect of the power sector challenges is the underperforming economy.

For instance, in June, the Manufacturing Association of Nigeria disclosed that its members lose N10.1 trillion annually to the power sector crisis.

However, with the signing of the 2023 Electricity Bill on June 9 by President Bola Ahmed Tinubu, stakeholders postulated that this could bring about the much-desired change in the sector provided it is implemented across the sector.

Here, Nigeria’s Minister of Power, Adebayo Adelabu, would need to give the sector the needed policy direction beyond statements.

Wumi Iledare, Professor Emeritus and Executive Director, Emmanuel Egbogah Foundation told DAILY POST on Monday that the 2023 Electricity Act presents a new horizon for the country’s power sector.

He noted that the way forward is to invoke proper implementation of the Electricity Act.

“My advice remains the same— decentralisation of the power sector with proper regulatory institutions at the state and the federal levels.

“The Electricity Act, as amended, is forward-looking. Of course, one thing is to have a good law, and another is to follow the law’s intent.

“I remain convinced that at the level of development in Nigeria, vertical integration in the power value chain remains a valid market option for value optimization.

“NERC must step up to the plate as a regulatory institution. The Ministry of Power is not a regulatory but a policy institution; of course, it cannot be a commercial institution.

“I believe the adopted market structure for power privatisation has been faulty since its inception. Look at the turnover of the executives in Disco. Restructuring the power market for economic efficiency is critical as the licences expire. The Disco market jurisdiction is too big not to experience diseconomies of scale.

“The idea of owning a share in Discos reminds me of the Joint Ventures in Nigeria’s oil and gas sector. For what purpose, one may ask? Revenue enhancement for FG or energy security mantra?

“If investors can come from every corner of the globe and invest in the telecom industry, why not open up the power industry for global investors?

“Finally, the economy of Nigeria is moribund because of low energy consumption precipitated by energy availability, accessibility, affordability and adaptability. The way forward is to invoke proper implementation of the Electric Power Act to reform the power industry and restructure the electricity distribution markets under state institutional control.

Also, Kunle Olubiyo, the President of Nigeria Consumer Protection Network faulted the power sector privatisation framework.

According to him, the Performance Agreement and Licensee Moratorium expiration would allow the government to rejig the sector.

“The Performance Agreement & Licensees Moratorium was not given to last forever or in perpetuity.

“It was originally designed to last for five years (2013 – 2018).

“Surprisingly, it was extended by an additional five years, bringing it to 10 years (2013-2023).

“In all this, no meaningful regulatory efforts were made to appraise the licensees on the grounds of Key Performance Indicators, Service Agreement, Performance Agreement or vesting Contracts.

“Key Performance Indicators are primarily based on Timeline, Actionables, Deliverables, etc.

“It is obvious that all is not well, and the beneficiaries in and out of government and the licensees will stop at nothing to ensure that nothing is done to do the needful.

“Our efforts in the prevailing circumstances aim to arouse public conscience and consciousness.

“If you set out a rule for a football game, you don’t implement it at will or convenience. The rules of the game are sacrosanct. The Regulatory Ecosystem has suffered unprecedented inducements and weaknesses in the power sector privatisation exercise.

“It is therefore reasonable for the government to explore this window of expiration of the 10-year moratorium of the Power Sector Privatisation Exercise so that the economy and Nigerians can breathe.

“In the final analysis, the depth of the findings of the regulatory review of the power sector privatisation exercise will determine the next line of action of the Nigerian Government”, he stated.

On his part, Adetayo Adegbemle, Convener and Executive Director, PowerUp Nigeria, said the review of the power sector privatisation agreement is pivotal to repositioning the industry.

“Things were unclear pre-privatization, and many didn’t even know what to expect. So, it’s been a decade of learning for us all.

“The interesting thing about asking for reviews is that even without a ‘particular review’, the sector has been evolving.

“There are some low-hanging fruits like Metering of Consumers and all interfaces in the power sector, like Customer Enumeration and classification, like balancing the mismatch between Generation, Transmission and Distribution.

“All these are low-hanging fruits that should be addressed immediately and would affect the sector”, he said.

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