What Does the Nigerian Power Sector Need?

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The Nigerian power sector is continuously characterized by an epileptic power supply, this causes numerous power outages and is quite frustrating for the electricity consumers. However, it’s interesting to know that the terrible feature of the power sector is not a new thing. It started long before the sector’s privatization born from the Electric Power Sector Reform Act (EPSRA) of 2005. Even in the past, NEPA was known for its continuous power failures; it was what led to the privatization in the first place.

 

NEPA and its Woes

Despite playing an effective role in the nation’s socio-economic development, NEPA was faced with numerous challenges. Citizens were plagued with consistent power outages at all levels. The sector was highly inefficient, energy theft was rampant (like it is today), and there was a metering gap which caused inaccurate collections for the body.  All these existed amidst the fact that the government annually pumped money into the power sector. Poor performances from NEPA earned it the backronym Never Expect Power Again.  As a result of the continuous unreliability of NEPA, the federal government took radical action and enacted the Electric Power Sector Reform Act.

The act called for the unbundling of the national power utility company into a series of successor companies. Different private companies were going to be responsible for the various components of the value chain: Generation, Transmission (still owned by the federal government) and Distribution. In 2013, the privatization process was complete, NEPA ceased to exist and was replaced with 6 generating companies (GenCos), 1 transmission company (TCN) and 11 distribution companies (DisCos). These companies along with a few bodies, including a regulatory one, NERC, were to ensure efficient functioning of the power sector.

 

A Failing Habit

Five years into the privatization and the story is still the same; inefficiency still causes multiple power outages. Old problems like the metering gap, electricity theft/vandalism, inefficient collections and a general lack of infrastructure have taken new looks in the face of privatization. The various players of the power sector value chain also trade blame with each other. Observers claim that these current players born from the EPSRA haven’t played their roles. Contractual and performance agreements are yet to be fulfilled.

The government is not injecting funds as promised and government agencies are the biggest debtors to the DisCos. The Nigerian Army cantonment, police stations and hospitals are not paying their bills and are essentially stealing electricity. On the other hand, the DisCos signed on to provide meters, phase out estimated billing, invest in generation infrastructure, and improve collection efficiency. So far, the DisCos failed to deliver. Although there has been some improvement in the generating capacity, estimated billing and poor collections are still big issues no DisCo has been able to overcome. If the power sector can’t get its act together, how then can the country foster development?

 

What Does the Nigerian Power Sector Need?

Maybe the problem was never who oversaw it. Under both government and private ownership, the power sector faces similar challenges. Inefficient collections pose one of the great threats to the sector’s sustainability. This, coupled with the present metering gap can cripple the sector completely. Currently, in a country of over 190 million people, not more than 8 million electricity customers are metered. Without proper metering, DisCos can’t accurately tell how much electricity is being consumed. It also allows for electricity theft which has become a common practice. To battle electricity theft, some DisCos bill customer’s outrageous amounts to recoup money for electricity distributed. With NERC making headway in its Meter Asset Provider (MAP) by recently licensing companies to assist DisCos with metering customers, we may see an end to all of it soon.

It is also argued that the current electricity tariff is too low and not cost-reflective. The low tariff isn’t attractive to investors as the cost of generating, transmitting and distributing is higher than the selling price. Without the right investors, the sector will not be able to develop or address some issues that only money can solve.

Furthermore, the sector lacks proper infrastructure to meet the electricity demand in the country. The national grid is ageing and in dire need of an upgrade. Experts say that asides upgrading the current grid, the government should also enable embedded generation and develop mini-grids to help put an end to power shortages. Regional grids run and funded by collectively state governments they cover can be introduced. Progressive economies such as China, India and the USA operate regional grid systems. According to the World Bank’s State of Electricity Access Report, China provided 900 million people with electricity through its regional grid system.  Introduction of alternative sources of energy has also been called for as we’re currently over-dependent on fossil fuel.

 

Is TCN a Problem?

After the privatization process, TCN remains the only component of the power sector value chain still owned by the government. It’s also the component with the least progress. Although the grid has a capacity of 12000MW, not more than 6000MW has been distributed. DisCos have complained that one reason for their low power supply is TCN’s inability to wheel out power generated by the GenCos.

“Privatization is the tool which most countries use to check their liquidity issue and beef up the economy and Nigeria can also do the same by privatizing some of her key sectors.” Dr Ayo Teriba said as he canvassed for the privatization of TCN while presenting his paper title: Macroeconomic Role of Privatization on the Nigerian Economy.

In TCN’s defence, it has been claimed that the transmission component of the value chain needs more than ₦100bn in investments to see improvements but the government can only dish out about ₦10bn. TCN’s underlying issues have been low funding and low grid capacity. These were characterized during MHI’s period as management contractor and is still shown under Nigeria’s management. If privatized, investors will be willing to pump the needed funds to ensure improvements.

It is important to note that for the efficient performance of the power sector, all components of the value chain, especially TCN, must be performing optimally. TCN is responsible for wheeling power from generation companies and delivering it to the DisCos for sale. The entire power sector and privatization process would profit from a professionally operated TCN.

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1 Comment

  1. I am from Alaska and we sometimes have to use generators to have power when it is too cold to get power from power lines. I know about your problems of people stealing your equipment through association. I believe that if you started saving money and put that money towards small generators to be used in each house for a rental fee. You could be rid of your power outages, and your thieves would have to come out of their hiding places to thieve but you can easily stop this with locks, and perhaps security systems. Not to mention they can be watched via satellite by security companies. You could even make your own. It would bring in money, jobs, employees for Nigerians. That would make everyone happy.

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