Growing concerns have arisen as Nigeria’s power sector privatization process, set to conclude on October 31, 2023, approaches its end. The situation has become even more problematic due to the persistent crisis in Nigeria’s power sector, which has plagued the electricity value chain, spanning generation, transmission, and distribution, for over 62 years.
In an attempt to address the long-standing issues within the country’s ailing power sector, the government initiated the process of privatization, commencing with the 2005 Electric Power Sector Reform (EPSR) Act. This process officially began on November 1, 2013, with the hope of resolving the enduring power crisis.
However, a decade later, the power industry’s problems remain unresolved, obstructing progress in Nigeria’s economy. Electricity distribution companies continue to grapple with financial challenges and inadequate remittances, compounded by a lack of proper metering. Meanwhile, power generation companies struggle with insufficient investments and transmission inefficiencies, resulting in frequent grid failures.
Despite these challenges, Nigeria has been struggling to provide just 5,000 megawatts of electricity daily for a population of over 200 million people. According to the Nigerian Electricity Regulatory Commission (NERC), the generation capacity of the 26 power plants dropped to 4,387.91MW in the second quarter of 2023. Additionally, the power sector has experienced significant annual capacity payment losses, with figures reaching as high as N273.32 billion in 2016 and as low as N88.13 billion in 2022.
The government has intervened at various times, including providing loans and power assurance guarantees, yet the power industry continues to face challenges, which have adversely affected the economy. For instance, the Manufacturing Association of Nigeria revealed that its members lose N10.1 trillion annually due to the power sector crisis.
The signing of the 2023 Electricity Bill on June 9 by President Bola Ahmed Tinubu has raised hopes that meaningful change can occur in the sector if it is effectively implemented. However, the Minister of Power, Adebayo Adelabu, must provide the necessary policy direction to drive this change.
Wumi Iledare, Professor Emeritus and Executive Director of the Emmanuel Egbogah Foundation, highlighted the significance of the 2023 Electricity Act and stressed the importance of its proper implementation. He recommended decentralization of the power sector, with robust regulatory institutions at both state and federal levels.
Kunle Olubiyo, the President of Nigeria Consumer Protection Network, criticized the power sector privatization framework and emphasized the need for a regulatory review to address the sector’s challenges as the Performance Agreement and Licensee Moratorium expires.
Adetayo Adegbemle, Convener and Executive Director of PowerUp Nigeria, underscored the importance of reviewing the power sector privatization agreement to reposition the industry. He pointed out the need to address critical issues such as consumer metering and improving the balance between generation, transmission, and distribution.