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Published On: Thu, Sep 26th, 2019

Reforming the power sector

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By Rachel Mujong Humwapwa

The need for power (electricity) cannot be underrated especially when it comes to the development of a nation. The power sector is therefore very essential to the development of the nation, Nigeria. Power is sought for in individuals’ daily businesses, infrastructural and industrial activities.
Many nations in the world have adequate supply of electricity. Apparently, Nigeria has been an exception. Despite her naturally blessed resources, it has been a struggle for Nigeria to maintain a stable and efficient power sector. This becomes even more hurtful, considering the array of technocrats the nation parades both in the local and foreign fronts, series of meetings between stakeholders and even regulatory interference all availing to nothing.
African countries like Ghana celebrated uninterrupted power supply for more than three years. South Africa with a population of about 60 million produces 51,309MW while Nigeria with a population of about 190 million produces just 4000MW. As the supposed giant of Africa, we still are unable to produce sufficient megawatts for more than half of the population. The privatization process was fundamentally embarked upon to ensure stable electricity supply of power to both homes and industries.
Over the years the government has undertaken various means, strategies and reforms to grow the power sector and see to it that it works, but all attempts have been an exercise in futility. Under the Electric Power Sector Reform (EPSR) act of 2005, the Power Holding Company of Nigeria (PHCN) was established to take care of the functions, assets, liabilities and employees of National Electric Power Authority (NEPA), a onetime national holding company. The government then unbundled the PHCN into eighteen successor companies; six generation companies (GENCOs), eleven distribution companies (DISCOs) and one national power Transmitting Company of Nigeria (TCN).
By 2010, the power sector still yielded no tangible result. This called for another reform; the Roadmap of the power sector reform. This reform set the momentum for further privatization and by 30th September 2013, the PHCN successor company’s aside transmission company was privatized with a US 2.5 billion transaction. PHCN therefore ceased to exist. The legal control of the power sector is regulated by the government through the Nigeria Electricity Regulatory Commission (NERC), however it is owned by individual stakeholders who were granted certificates of ownerships.
Following the privatization process, more problems where created in the power sector. Rather than healing the wounds of the power sector more wounds where created. The privatization process has been a massive catastrophe for the nation’s economy. It has caused untold hardship for the people already living on the fringe of poverty. More than 60 per cent of Nigerians have no access to electricity. Those who have, hardly enjoy its benefits due to erratic supply.
The process of privatization itself was not effective; it featured a flawed process that worked on the bases of estimation and assumptions. Members and information used comprised of only the federal government. In reality most technical partners were invited only as technical operators. As one Omofoma observed, the hostility of some Electricity Union workers prevented physical inspection of assets by bidders as part of the process initiated by the Bureau of Public Enterprise (BPE).
The administration that carried out privatization exercise is accused of selling the companies to cronies of the past administration. The process was therefore for the few privileged elites. Some of the estimations include: Multi Year Tariff Order (MYTO) assumed to be sufficient to raise enough revenues from DISCOs in order to fund the value chain, a N100 billion transitional subsidy to DISCOs that will prevent rate shock, DISCOS were assumed to be financially viable.
Power sector lacks cost reflective electricity tariffs. Nigerians are groaning over costly electricity tariffs despite the fact that they do not enjoy adequate power supply. The government hike electricity tariff by up to a hundred percent claiming to make profit for the private enterprise. This has rather subsidized public suffering for private gains
Based on the operations of the privatized power sectors especially amongst the DISCOS, it is obvious that funds have been mismanaged and mishandled. There has been a mismatch between the funds channeled by the government towards restoring the sector and the service currently provided by the operators. In the last five years there has been a consistent supply of funds by the federal government through the CBN, USAID- funded energy initiative, the Japanese government and the World Bank amongst others.
According to the Nigerian Electricity Supply Industry (NESI), the losses recorded by the sector translate to an average of about N1.5 billion monthly, totaling about N90 billion in five years. This loss is attributed to water, gas and transmission line constraints. Despite the release of funds to the DISCOs, they have not effectively distributed the generated energy. While about 7000MW is generated only 4000MW is distributed. Also, the meters have not also been installed in many areas. DISCOs undertook to provide meters and they are not fulfilling their promises.
The problem of revenue generation and collection is another issue that has destroyed the power sector.
Despite holding the ninth largest gas reserves in the world, one of the main challenges currently faced by thermal GENCOs is insufficient gas supply. Due to poor gas infrastructure, domestic gas supply has been a major challenge in Nigeria.
As a point of inferred probity, these recommendations are made: ruling elites should reduce their level of intervention in the privatization process as it has only been for their advantage. Secondly, there is need for the DISCOs to be more transparent and accountable in their dealings with finances. Thirdly an agreement be reached by the NERC and DISCOs to ensure that only prepaid meters are used, billing and estimation have proven to be ineffective. Lastly, administration and management of the power sector should be effectively reviewed to ensure proper maintenance and positive output.
In conclusion, the power sector is indeed capable of bringing rapid transformation to the economy due to its multiplier and tickle down effects on the society. Despite the privatization of Nigeria’s electricity industry, it is still plagued by numerous challenges such as: mismanagement of funds, poor administration, it was formed on the bases of estimations and assumptions, poor revenue generation and collection. However these challenges can be resolved. If the recommendations listed above are duly put into consideration, it will go a long way in bringing stability in the power sector and promote overall development of the country.
Humwapwa, is a Batch “C” National Youth Service Corper with the Institute for Peace and Conflict Resolution, Abuja

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