Nigeria’s Endless Cycle of Power Failure

Nigeria, a country of over 200 million people, endowed with every resource needed to generate power, including large gas deposits, hydro, solar and even wind sources, still relies on roughly 3,500 to 4,000mw of electricity for its huge population. In this report, Emmanuel Addeh asks if the country will ever achieve stable and reliable electricity supply, with what appears to be all motion, no movement by past and current players in the industry

Sixty years after Nigeria effectively gained independence from its British colonial masters, the country is yet to come close to attaining any level of sufficiency in its pursuit of reliable power for its people and their businesses. Today, it’s no longer shocking to see offices owned by electricity Distribution Companies (Discos) in several states of the federation, being powered by generating sets and some others using rechargeable lamps when customers visit to carry out transactions.

In the recent past, from those who have had the full confidence of the Nigerian people, like the late Chief Bola Ige through to Prof. Barth Nnaji and then lately, Mr. Babatunde Fashola to the not so smart ones, the story of failure to transform the sector has been the same. The problems of the power sector have several layers with many different sides, but past and present governments’ attempts, mostly half-hearted, have not brought about any marked changes, save for blame games.

In the Beginning

Historically, the geographical space now called Nigeria was said to have had its first semblance of power in 1886 , when it had its first two power generators installed in the colony of Lagos, followed by the first electric utility company, known as the Nigerian Electricity Supply Company, which was established in 1929.

In 1951, an Act of Parliament established the Electricity Corporation of Nigeria (ECN), while by 1962, the Niger Dams Authority (NDA) was also established for the development of hydroelectric power.

This again underwent a major change in 1972 when the ECN and NDA were merged to create the National Electric Power Authority (NEPA), which before it was effectively liquidated, also failed to satisfy the needs of the country.

With the failure of NEPA, which was fully controlled by the government, the need to unburden and unbundled the sector and allow private sector players take part arose, with the argument that indeed government should have no business in business.

In 2001, the so-called reform of the electricity sector began with the promulgation of the National Electric Power Policy which had as its goal the establishment of an efficient electricity market in Nigeria.

It had the overall objective of transferring the ownership and management of the infrastructure and assets of the electricity industry to the private sector with the subsequent creation of all the necessary structures required to form and sustain an electricity market in Nigeria.

In 2005, the Electric Power Sector Reform (EPSR) Act was enacted and the Nigerian Electricity Regulatory Commission (NERC) was established as an independent regulatory body for the electricity industry in Nigeria.

In addition, the Power Holding Company of Nigeria (PHCN) was formed as a transitional corporation that comprises 18 successor companies (6 generation companies, 11 distribution companies and 1 transmission company) created from NEPA.

Under the Olusegun Obasanjo government, NEPA was renamed Power Holding Company of Nigeria (PHCN) and EPSRA was enacted, to allow private investment in electricity generation, transmission, and distribution.

That development effectively commenced a privatisation programme which ended in 2013 with the federal government giving up about 90 per cent of its stakes to the newly created Generating Companies (Gencos), holding on to 40 per cent of the Discos and taking full ownership of the Transmission Company of Nigeria (TCN).

Ironically, NEPA, a vertical integrated utility company, in all its years of operation and billions of naira sunk into its activities could only muster a total generation capacity of less than 6,200 MW from two hydro and four thermal power plants even at its peak.

Despite the several name changes and consequently, the “privatisation” of the sector, not much has happened, not much improvement has been achieved, making many Nigerians align with a former Minister of Power, Prof Chinedu Nebo, who once posited that indeed there are demons in the sector who frustrate every attempt at providing power for Nigerians.

Has Privatisation Failed?

Indeed, not a few Nigerians hold the view that the much touted privatisation which was seen as the panacea to the failure of the sector in the past , has itself failed. From lowly placed Nigerians to a handful of power brokers, the consensus is that if the exercise that was consummated over seven years ago has not yielded any significant fruits in terms of power supply, then it should be reviewed.

One of those who have called for an outright undoing of the programme is no other person than the current number three man in the country.

Senate President, Ahmed Lawan, while decrying what appears to be the movement of a rocking chair in the sector which seems to have witnessed many activities in the past decades, without commensurate progress, called for the outright dissolution of the privatisation deal.

“If we leave them (sector players) for the next 10 years, there would be no power in Nigeria. We gave them our common patrimony and they still come back as Discos and Gencos to look for money from the public.

“I think it’s time for Nigeria to consider reversing the privatisation of the power sector or they should just cancel the entire privatisation process completely.

“The privatisation has so far not been successful. We expected efficiency, effectiveness in power supplies but probably on both sides, maybe the purchase agreements were not adhered to on both sides. What is obvious is that the Discos particularly have no capacity at the moment to supply us power,” he said.

He’s not the only top government official that has called for a review of the exercise. One item on the proposal that was to be submitted to the National Executive Council (NEC) under the current administration, once hinted on the move also.

“Electricity supply in the country is broken down completely. Reversal is one of the recommendations we are putting forward, but we know that it has implications. The problems are many; the entire sector is broken, there is a fundamental structural problem,” the head of the committee once hinted. But it’s not as easy as snapping a finger. The issues are complex.

However, NERC, the power sector regulator, vehemently disagrees with this position of cancelling or reviewing the privatisation that was concluded in 2013.

The regulator argued that the federal government does not have the money to buy back the utilities and may be acting in contravention of the agreement entered with the new owners.

It added that any attempt to reverse sales of the utilities will send a wrong signal to potential investors, advising that rather, a bond issue proposed for the industry to make cheap funds available for investors should be considered.

The body, however admitted that the operators in the sector had not met the signed level of performance agreement reached between them and the federal government represented by the Bureau of Public Enterprise (BPE).

The Blame Game Continues

While Nigerians continue to live in darkness and struggle to do business with improvised sources of power, the major players, namely the Gencos, TCN and Discos continue to engage in the blame game.

It is not uncommon to hear the Discos blaming the transmission company of having too weak infrastructure to wheel enough electricity to its facilities or the TCN blaming the distribution companies of failing to improve their infrastructure in their over seven years of existence.

On the other hand, the Gencos believe that the both the TCN and the Discos are to blame since they (Gencos) have more than enough generation, but are being impeded by the limited carrying capacity by the TCN and Discos.

In addition, the Gencos say that the governing contract agreements reached with BPE prior to the takeover of the power industry on November 1, 2013, commonly called industry agreements which include the Power Purchase Agreement (PPA), the Gas Supply Agreement (GSA), the Gas Transportation Agreement (GTA) and the Grid connection agreement have not been activated.

Since the new owners took over in 2013, the Gencos posit that none of the agreements have been activated, a situation they say, has resulted in the non-payment for power generated and supplied to the national grid, as there has not been any effective power purchase agreement since 2013.

On the other hand, the Discos maintain that the NERC’s target to TCN to support the evacuation of power by about 50 per cent between 2016 and 2019 and thereafter has been met with failure, since the company has performed by just about 13 per cent.

“Since 2015, there has been no significant improvement in the energy generated and wheeled by TCN that is finally received by Discos. It continues low and flat, only affected by a seasonal effect between the dry and rainy seasons,” the Discos stated.

In the same manner, the Discos are routinely blamed for rejecting electricity load, a development that has led to what is now termed “stranded power”, even though Nigerians live almost in perpetual darkness.

Celebrating Mediocrity

It is now commonplace to see the ministry of power and the agencies under it clink glasses for what they term improvements, even though it’s rarely experienced in Nigerian homes.

Last week, TCN gleefully celebrated what it said was the successful transmission of an all-time peak of 5,584.40MW.

The TCN in a statement by its General Manager, Public Affairs, Mrs. Ndidi Mbah, explained that the “feat was” recorded by the power sector on Thursday, January 7th 2021, at 21:15hrs.

“This is 24 hours after the previous peak of 5,552.80MW was recorded on Wednesday January 6th, 2021 at 20:15hrs that was equally transmitted. This latest all-time peak transmitted, surpasses the last peak generation of 5,552.80MW transmitted by TCN by 31.60MW.

“The management of TCN assures the general public that it will continue to work hard to ensure efficient transmission of power generated on the nation’s electricity grid,” the transmission company stated.

Even the Minister of Power, Mr. Sale Mamman, was ecstatic about the news, describing it as “impressive”. Tagging a 5,5840mw power transmission as “impressive” to many Nigerians, was the height of the celebration of mediocrity.

That in 2021, a country of over 200 million people, sector leaders would be celebrating just over 5,000mw as an achievement when Brazil with almost the same population and conditions as Nigeria’s generates 150,000MW, according to the International Energy Agency (EIA), beats all rational imaginations.

Hydroelectricity makes up the bulk of Brazil’s generating capacity, with the remainder provided by fossil fuel sources, biomass (12 GW), and small amounts of wind and nuclear. Nigeria has all these in abundance.

Additionally, Indonesia’s installed capacity as of 2018 stood at 62,589MW, South Africa, with a population of approximately 52 million produces 32,000MW. And yet none of these nations is resting on their oars, not even Ghana Nigeria’s neighbours with far less resources.

With roughly two years to go for the current administration, many believe that rather than celebrating a miserly 5000mw, the minister, rarely seen, rarely heard, should devote more time in communicating the ministry’s achievements if any, given the misalignment in the sector and the unusual quiet that has followed the Siemens deal, since the agreement signing ceremony in July last year.

Facing Unpleasant Reality

The Nigerian power sector is in crisis and it has been so for decades. Industry data suggests that Nigeria has just about 13,000 MW of installed generation capacity, being largely dependent on hydropower and fossil (gas) thermal power sources of 12.5 per cent and 87.5 per cent respectively.

However, only 3,500 MW to 5,000 MW is typically available for onward transmission to the final consumer, with the extensive losses attributable to weak infrastructure and a very high occurrence of significant technical and non-technical issues through the power supply value chain.

Nigeria has one of the lowest annual consumption of electricity per capita, estimated at less than 150 kWh, giving rise to the use of alternatives like standby generators, with capacity of this captive power source estimated to be as high as 14-20 GW.

The electricity demand in the country, continues to increase, while supply is dismally constant. Although, the over 20 grid-connected generating plants in Nigeria is approximately 13,000MW, many plants suffer from recurrent challenges such as maintenance and repair requirements, trips, faults, and leakages, that make them unavailable for evacuation to the national grid.

The transmission segment of the electricity value chain remains fully government owned with the capacity to wheel just about 5,300MW of power or thereabout.

But even at that, due to generation constraints, less than this capacity gets wheeled. Underinvestment in building new infrastructure and lack of appropriate maintenance of the current infrastructure has constrained the transmission network expansion.

Although the transmission network has recorded a decline in system collapse incidents (partial and total) on the transmission grid between 2010 and 2020, infrastructure remains weak.

For distribution, data shows that a substantial percentage of technical losses before electricity reaches the final consumer is attributable to them.

Whatever the situation, the reality today is that many Nigerians do not have access to power supply and when they do it’s not reliable.

The World Bank estimated as of two years ago that the country would need to connect between 500,000 to 800,000 new households to electricity sources every year between then and 2030 to be able to achieve her targets of universal access to electricity for its citizens.

According to the bank, Nigeria’s inability to provide electricity to about 80 million of its people meant that it is the second country after India in the world with more of her population without electricity and the first in Sub-Saharan Africa.

“With about 80 million people lacking access to grid electricity, Nigeria has the largest access deficit in Sub-Saharan Africa and the second largest in the world, after India,” the bank noted in 2018.

Any Way out?

A former Chairman of NERC, Dr. Sam Amadi, has argued that part of the ways to solve the current problems in the Nigerian Electricity Supply Industry (NESI) is to break the power grid into regions

Amadi explained that the development will bring about competition among the grid operators, who will thrive to outdo one another, but admitted that the problems in the sector were multi-faceted, including managerial and political issues, misalignments as well as investment challenges.

He said: “There is acute and comprehensive shortages and there are issues of geography like in the north where you have sparsely populated and dispersed areas which require long lines of network.

“If that is not looped, then total losses will be very high. We have shortage of quality of transmission network, shortage of generation, meaning that we don’t even have capacity. Some 4,000 mw, potentially available and sometimes 2,300mw.

“We have distribution network problems. There’s low tolerance level in the sense that if something snaps, something quickly takes it up. There’s also poor managerial capability and maintenance culture which means that we have not done any maintenance, oversight etc. for a long time. They are old problems.

“But in solving them, we think there’s disruptive, disjointed approach in terms of reforms, (they) privatise this, privatise that instead of a gradual incremental managerial improvement on the managerial side and investment and project management will get underway.

“If you privatise the grid, like you have with the distribution companies, where you have scarcity, a market that’s almost non-existent, then you can be sure who comes to the market and have the managerial and financial capacity to make the kind of needed investment.”

As part of solving the problems, he said decentralisation could play a positive role, arguing that as it is currently constituted, much of the financing in the sector goes into funding the bureaucracy as represented by the power minister and across the entire strata.

“We talk about decentralisation, we probably need to be thinking about it on the national grid. But one outcome is that there will be significant improvement in some grids and grid loss in some.

“Again, the problem is political, we get our power based on sharing formula. Not based on use. If have the usage formula, Lagos zone will get much more power than Yola that is quite distant and removed from source of supply.

“Primarily, regionalisation will improve our supply, improve local competencies, give some gap for some people to catch up and grow. Technology is changing, moving from large scale to modular capacity in terms of embedded generation, isolated distribution network, convergence in transmission network.

“We need to rethink the grid. But the primary problem is elementary, managerial, capacity and investment and how much goes into the sector problem instead of financing the bureaucracy that’s wasteful and incompetent.

“Look at the leadership structure of the electricity market today, from minister downwards. Let’s have some incremental improvement before disruptive things. Regionalising the grid could be a way to take the large scale inefficiency away from the system,” he stated.

He described the Siemens deal as a good move, but lamented that NERC was sidelined throughout the process, making it fail to exercise some prudency checks in it the execution.

Amadi stressed that Nigeria should have commercialised, rather than privatise the power sector, like Egypt did, arguing that the sector cannot move from N20 to N40 without commensurate improvement in quality of service.

“The Discos have failed in their duty because they are not able to improve services. They are not engaging their customers. We need a lot of communication,” he noted.

He maintained that those, who invested in the sector, deployed short term or ‘hot funds’ into an industry that clearly requires long-term returns, noting that they are now desperate to make quick returns on their investment because of the nature of the monies put into the business.

But NERC believes that pricing is one major issue that has to be dealt with in the sector before any meaningful progress can be made, stating that with good pricing, investments will naturally flow into the sector.

“This is because investment follows certainty. Nobody will invest where he is going to make a loss. But where you can do your projections and see that there is a return, people will invest.

“It is just pure economics and it is the same economics that applies to every business… the issue is that price drives investment. And when you attain the appropriate level of investments and achieve the economies of scale, price starts to come down. And you see in every sector this happens; it happened in telecoms,” Dafe Akpeneye, NERC’s Commissioner, Legal, Monitoring and Compliance, stated.

Nigerians do not care how electricity supply gets to their homes, all they need is to be able to power on their bulbs and appliances. And all they want is to do their businesses and not spend 40 per cent on generating power on their own. That’s not too much to ask in 2021.