62 Years of Unbroken Jinx in Nigeria’s Power Sector
Power
The failure of successive administrations to solve the power sector problems even with the recent privatisation is a big embarrassment as Nigeria marks its 62nd independence, writes Festus Akanbi
As programmes lined up for this year’s independence anniversary wind down this week, one major regret of the government and the organised private sector is the colossal failure of successive administrations to satisfactorily revive the Nigerian power sector.
And like a stubborn ailment that has continued to defy treatment, the Nigerian power sector, which has undergone different levels of diagnosis and treatments appears to be resistant to the harvests of interventions from the public and the private sector since Nigeria attained its independence in 1960.
Whatever the situation, the reality today is that many Nigerians do not currently have access to as much power supply as they would want and when they do, it’s not reliable.
Recently, the World Bank estimated 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 its targets of universal access to electricity for its citizens.
OPS Count Losses
It is a well-known fact that the abysmal performance of the power sector has continued to shake the nation’s economy to its foundation with many organised private sector operators having to expend a substantial portion of their revenues on generating sets. The fate of these organisations is also sealed by the prohibitive cost of diesel over the years, thereby forcing many companies to shut down or relocate to neighbouring countries.
The small-scale industry is not spared as the fear of incurring heavy losses as a result of poor access to power has forced many ambitious business owners to perish their thoughts.
The attendant loss of jobs and threat to government plummeting revenue in form of taxes is another dimension of the fallout of the power sector crisis.
Power Generation
Nigeria is endowed with large oil, gas, hydro and solar resources, and it has the potential to generate 12,522 MW of electric power from existing plants. On most days, however, it is only able to dispatch around 4,000 MW, which is insufficient for a country of over 195 million people.
The Nigerian power sector experiences many broad challenges related to electricity policy enforcement, regulatory uncertainty, gas supply, transmission system constraints, and major power sector planning shortfalls that have kept the sector from reaching commercial viability.
According to reports, Nigeria’s national grid has been plagued with challenges in the transmission and distribution subsectors, which has made it difficult to evacuate the available generation capacity through the grid. The Nigeria Electricity Regulatory Commission (NERC), based on data obtained in 2021, reported that power distribution in the year, averaged 4,094.09 megawatts (MW), despite an available generation capacity of about 8,000 MW2. Relatedly, average unutilised power generation increased year-on-year, YoY, to 3,008.18 Megawatts, MW in 2021, from 1,030.80 MW in 2013, indicating an increase of 291 per cent in the past eight years.
The Beginning
It would be recalled that power generation in Nigeria began in 1886 when two generating sets were installed to serve the then Colony of Lagos. By an Act of Parliament in 1951, the Electricity Corporation of Nigeria (ECN) was established, and in 1962, the Niger Dams Authority (NDA) was also established for the development of hydroelectric power. A merger of the two organisations in 1972 resulted in the formation of the National Electric Power Authority (NEPA) which was saddled with the responsibility of generating, transmitting and distributing electricity for the whole country. In 2005, as a result of the power sector reform process, NEPA was unbundled and renamed Power Holding Company of Nigeria (PHCN).
The Electric Power Sector Reform (EPSR) Act was signed into law in March 2005, enabling private companies to participate in electricity generation, transmission, and distribution. The government unbundled PHCN into eleven electricity distribution companies (DisCos), six generating companies (GenCos), and a transmission company (TCN). The Act also created the Nigerian Electricity Regulatory Commission (NERC) as an independent regulator for the sector.
At present, the federal government has fully divested its interest in the six GenCos while 60% of its shares in the11 DisCos have been sold to the private operators. The Transmission Company still remains under government ownership.
At the Mercy of Creditors
If there is any major headache for the electricity supply industry in the country, it is the threat posed by their weak corporate governance framework. To this end, the ministry of power said it is putting in place new plans to support the strengthening of that critical part of the sector.
The conflicts between the Discos and their creditors have recently led to the takeover of some power distribution in a bid to prevent their total collapse, but the ministry says this is a temporary measure.
From the Abuja Electricity Distribution Company (AEDC) which was taken over by the UBA to the recent changes relating to corporate governance in Kano, Benin, Kaduna, Ibadan and Port Harcourt electricity distribution companies, the push has been to halt the decline in the discipline in the governance of the Discos.
The government has continued to roll out bailout to the power sector, but analysts believe the problem could be traced to the opaque manner of the privatisation of the assets.
Recall that in December 2021, the Minister of Finance, Zainab Ahmed and Aliyu secured the approval of the FEC for €63 million for the procurement of equipment to boost power supply under the PPI.
Lessons from Other African Countries
Relying on Tracking SDG7: The Energy Progress Report, one can see that while Nigeria has found it difficult to put its house in order as far as access to power is concerned, some other African countries have been able to break the power jinx in their respective jurisdictions.
The source, which was last updated in 2019, is a global dashboard dedicated to registering progress on energy access across Africa and elsewhere, as part of the targets for the Sustainable Development Goal 7 (SDG7). The dashboard is a collaborative initiative by the International Energy Agency (IEA), the United Nations Statistics Division (UNSD), the World Bank and other partners.
One of the African countries with excellent power service delivery is Egypt. According to the report, Egypt has achieved a 100% national electricity access rate for both the rural and urban population and its electricity is sourced mainly from hydropower and thermal power stations, with the country advancing as a leader in the renewable energy sector.
Another example is Morocco which has achieved a 100% national electricity access rate for both its rural and urban populations. Morocco represents a high potential renewable energy market, particularly regarding solar. With plans to increase the share of renewables in the energy mix to 52% for wind and solar by 2030, major developments are currently underway.
Next is Tunisia which is able to cover all its domestic consumption needs. Tunisia boasts 100% national electricity access for both rural and urban areas.
The north African country of Algeria came close, scoring 99.8% in terms of national electricity access.
With a 99.8% national electricity access rate – 99.6% in rural areas and 99.9% in urban areas Gabon is another country doing well in terms of the performance of electricity. The country boasts an electricity access rate of 91.6%. Electricity access in rural areas stands at 27.8%, the urban population has an access rate of 98.6%.
And in neighbouring Ghana, the people have 85.9% access to power. Ghana’s electricity mix is dominated by hydropower energy, thermal energy and gas. Currently, the country has a national electricity access rate of 85.9% with 74% access in rural areas and 94% in urban zones.
Also included is South Africa with 84.4% access. South Africa currently generates most of its electricity from coal, with the country’s national access to electricity rate standing at 84.4% – 75.3% for rural areas and 88.8% in urban areas.
Botswana is not left out with 72% access to electricity. Botswana mainly generates its electricity from coal, wood and petroleum, relying on coal and petroleum product imports from South Africa and other regional neighbours.
Kenya is not doing badly with 71.4% access. With a 71.4% national electricity access rate, comprising 62.7% for rural areas and 94% for urban areas, Kenya has the highest access rate in east Africa.
Another country with good performance is Senegal with about 70.4% access.
With an estimated national electricity access rate of 70.4%, further detailed as 47.4% for rural areas and 95.2% for urban areas, the West African country is targeting universal access to electricity by 2025, driven by new gas-to-power developments and renewable investments.
The question being raised by industry analysts is if these fellow African countries can do it well in their jurisdictions, why is Nigeria finding it difficult to put its house in order as far as electricity access is concerned?
