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Published On: Fri, Oct 31st, 2014

Power privatisation Anniversary in Nigeria: The challenges and prospects

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The Minister of Power, Professor Chinedu NeboBy Etuka Sunday

In the 1st of November 2013 to be specific, the federal government officially transferred the assets of the Power Holding Company of Nigeria (PHCN) to 14 successor companies, marking the era of privately led power sector in the country.

The official transfer of assets which was done in Abuja by the Minister of Power, Prof. Chinedu Nebo on behalf of President Goodluck Jonathan, was adjudged by the international community as the most transparent privatisation ever done in the history of the world. As expected, hopes were high among Nigerians since the investors came with the promise to end the perennial darkness in the country.

The investors who took over the power utility were Mainstream Energy for Kainji and Jebba Generation Company; North South for Shiroro; Amperion for Geregu; Transcorp/Woodrock for Ughelli; and NEDC/KEPCO for Egbin.

Others were Kann Consortium for Abuja Distribution Company Limited; Virgeo for Benin Disco; West Power and Gas for Eko Disco; NEDC/KEPCO for Ikeja Disco; Sahelian for Kano Disco; Integrated Energy Distribution and Marketing Company for both Ibadan and Yola Discos; 4Power Consortium for Port Harcourt Disco; Interstate for Enugu Disco; and Aura Energy for Jos Disco.

By that physical handover of the power utility to the investors, the federal government believed it had ‘tamed the power monster’ in Nigeria and created an enabling atmosphere for the private sector to drive the process of providing uninterrupted electricity supply to the nation.

Incidentally, millions of Nigerians, including highly placed stakeholders such as legislators in our national and state assemblies, assumed privatisation will immediately usher in a new phase of uninterrupted power supply, notwithstanding the decrepit state of facilities inherited by the new investors.

It is on record that Nigeria has one of the most backward power sectors in the world, with an estimated installed electricity generation capacity of 8,644 mega watts (MW), and available capacity of only about 3,718 MW, to cater for the needs of a population of almost 170 million.

In comparison, South Africa, with a population of nearly 50 million people, has an installed power generation capacity of over 52,000 MW, and is generating at least 40,000MW.

On a per capita consumption basis, Nigeria has been ranked a distant 178th in the world, with 106.21 KWh per head – well behind Gabon (900.00); Ghana (283.65); Cameroon (176.01); and Kenya (124.68). Available records showed that the Nigerian power sector has been in this parlous state due to almost two decades of neglect, corruption and inefficiency.

For instance, after the promulgation of Decree 12 of 1972 which established the National Electric Power Authority (NEPA) the same year, the federal government made considerable efforts to develop the sector by building some of the power plants such as Shiroro, Jeba, and Egbin, as well as enhancing the power transmission network.

However, the power sector began to witness steep decline in investments since after the commissioning some of these mega projects. For example, the Director General of the Bureau of Public Enterprises (BPE), Benjamin Dikki, noted recently that “No new electric power infrastructure was built between 1991-1999”.

Dikki who disclosed this in a presentation at the first inaugural meeting of the National Council on Power (NACOP), on the 11th of August this year, also said:

“The newest (power) plant was completed in 1990 and the last transmission line built in 1987”. As a result, the generation, distribution and transmission capacity of PHCN, which succeeded NEPA has been abysmally low.

Dikki confirmed, for instance, that at the onset of the democratically elected civilian administration in 1999, the Nigerian electric power sector had reached, perhaps, the lowest point in its 100 year history, stressing that of the 79 generation units in the country, only 19 units were operational, and that average daily generation was 1,750 MW by then.


Because of these, there have been frequent power outages across Nigeria, even as an estimated 90 million of the country’s population have been without access to grid electricity.

The situation was worsened by our poor maintenance culture, thus making the power utility company an unviable commercial entity.

For instance, the nation’s power utility has been in a big mess for years, thus running at much higher losses in comparison with international standards.

The BPE boss noted in his recent presentation that though accurate and reliable estimates of industry losses were unavailable, PHCN’s losses were believed to be in excess of 50%, which is 40% above the global standard of 10%.

And with the lack of commercial orientation of PHCN, it is impossible to sustain such a capital intensive sector which is arguably the most critical requirement for the growth and development of the Nigerian economy.

To reverse this ugly trend and set it on a path to efficiency, therefore, the Obasanjo administration set in motion the process for the privatisation of the nation’s power sector. The reform process started in 2001 with the introduction of the National Electric Power Policy as well as inauguration of the Electric Power Reform Implementation Committee (EPIC).

In March 2005 the National Assembly passed the Electric Power Sector Reform Act (EPSRA).

The Act outlined the framework of the reform to include unbundling of NEPA into generation, transmission and distribution segments; provided for the transfer of assets, liabilities and staff of NEPA to PHCN and then to the successor generation, transmission and distribution companies; created a competitive market for electricity services in Nigeria; set up an independent regulator called the Nigerian Electricity Regulatory Commission (NERC).

The reforms in the power sector continued until the eventual hand over of the PHCN successor companies to the private investors on November 1, last year.

Since then, there has been gradual improvement in power supply across the length and breadth of the country because the new investors know all too well that they must make the right kind of investments, if they must improve power supply and win the confidence of electricity consumers nationwide.

It is instructive that the new investors in the sector are cautious in making big promises, in view of the huge capital investments required and the long gestation period needed to transform the sector.

However, Nigerians have good cause to cheer for what has happened so far in the power sector, just one year into its privatisation. The 11 distribution companies or Discos as they are often referred to have started investing massively to turnaround the sector.

For instance, according to recent media reports, Abuja Electricity Distribution Company (AEDC) alone is making over $200 million (about N33.6 billion) capital investment in improving its network, for enhanced quality of power supply in its coverage area-Federal Capital Territory (FCT), Kogi, Nasarawa and Niger states-over a period of five years from November last year.

Already, it is reported to have acquired and installed 140 transformers at the cost of over N200 million, to replace faulty ones.

Also, it is working on providing additional 200 distribution transformers with a combined capacity of 80MVA and an estimated value of N260 million. Other network improvement projects reportedly carried out by the AEDC since privatisation in November 2013, include upgrading of a transformer at Lokoja in March, 2014, which added 15MVA to the network; completion of a field base at Suleja in February, 2014, which also added 15MVA capacity; construction of a total of 49.5 kilometres of high tension (HT) lines between January and March this year, to enhance network reconfigurations and reinforcements; as well as completion of a 33KV power evacuation project in Gwagwalada, which led to the addition of 80 mega watts (MW) to the network and boosted power supply in Kwali, Yangoji and Abaji, among other communities in its network coverage area.

Undoubtedly, the noticeable improvement in power supply in several parts of the country, which many Nigerians have acknowledged, is due to the series of network improvements that the AEDC, the 10 other Discos, as well as the Gencos and the Transmission Company of Nigeria (TCN) have made. It is all too obvious that the new investors in the sector are doing a lot more that would in a few years to come guarantee uninterrupted power supply in Nigeria.

Although these changes may not result in immediate transformation of the power sector as millions of Nigerians would wish, the considerable improvements should give all Nigerians cause to celebrate the successful privatisation of the sector.

What is imperative for now is for all stakeholders-lawmakers, customers and other power consumers- to join hands with these new investors to protect power facilities across the country, and ensure that the nation realises its dream of getting out of the ‘dark era’ into a new dawn in the soonest possible period.


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