The need to improve the nation’s electricity supply industry cannot be overemphasized. Ten years after privatization the issues of liquidity, lack of infrastructure and energy loss remain prominent. FESTUS OKOROMADU examines the challenges and proffer solutions
The importance of access to electricity in an economy cannot be overemphasized. Development economists argue that it is about the single most important and vital tool that drives the emancipation of the people and the transformation of an economy.
Little wonder why the subject of energy (electricity) access holds a strong identity among the United Nations Sustainable Development Goals. International communities, like the International Energy Agency have identified SDG 7 – Ensuring universal access to affordable, reliable and modern energy for all – as a critical player in achieving the other SDGs. This emphasizes the role energy access plays in achieving sustainable economic growth.
Data from the World Bank indicates that more than 85 million Nigerians still lack access to electricity. Unfortunately, this is the situation despite several policy frameworks and initiatives developed and implemented by the Federal Government and development partners, thus making the achievement of universal electricity access elusive.
Until recently, the national grid was the main electrification route. Unfortunately, the model appears to have failed as it has been saddled with numerous challenges ranging from lack of liquidity to technical challenges. For those connected to the grid, inefficiencies and market challenges often mean insufficient supply.
Other challenges the sector is battling with include inconsistent tariff policy implementation and high, unsustainable losses in the distribution network.
For instance, the Nigerian Electricity Regulatory Commission in its third quarter 2023 report said the Aggregate Technical, Commercial and Collection losses recorded across all 11 distribution companies during the period was 39.45 percent.
A breakdown shows that 20.91 percent was due to technical and commercial losses, while the remaining 23.44 percent is said to be collection loss. By implication N39.45 out of every N100.00 worth of energy received by a DisCo was unrecovered due to a combination of distribution network losses, energy theft, low revenue collection and unwillingness of customers to pay their bills.
The overall impact of these is investors’ unwillingness to participate in the sector even when it’s obvious that to increase power supply capacity access to finance for developers is key.
On the part of the government, several programmes, including the Power Sector Recovery Programme, have been initiated to tackle and solve these challenges but there appears to be no end in sight.
Of course, the government has adopted alternative measures such as the Rural Electrification Strategy and Implementation Plan and the implementation of the Nigeria Electrification Plan, which aims to improve electricity access for last-mile regions, especially unserved and underserved rural community dwellers and the institutions in these places.
In addition, the Federal Government in partnership with donor agencies such as the World Bank and others such as the German government has launched programmes including the Presidential Power Initiative, to improve the situation.
“Data from the World Bank indicates that more than 85 million Nigerians still lack access to electricity”
In recent times, the off-grid solar sector has taken root as an alternative to the crisis. Some estimate that the sector has grown at a compound annual growth rate of 22 percent over the past five years. This growth has been heralded by initiatives such as the World Bank, and African Development Bank funded Nigeria Electrification Project – a $550m facility for off-grid electrification.
This facility and substantial government support – through the Rural Electrification Agency – have helped to improve off-grid energy access.
According to Nigeria’s Sustainable Energy for All dashboards, the total installed solar mini-grid capacity is 5.71MW, an almost 900 percent increase from 2018.
In addition, market players are increasingly announcing pipelines of mini-grid projects across the country. For example, Husk Power Systems, an Indian company that recently entered the Nigerian market, has plans to deploy 500 solar mini-grids in the country over the next five years.
The REA, as the implementing agency of the NEP, is devising mechanisms and models to ensure project development and continuity. Despite the progress, the state of electrification remains low in Nigeria. The electricity sector, especially the off-grid clean energy sector, is still faced with challenges that impede energy provision efforts.
Improving power supply – Tinubu initiatives
The electricity industry perhaps looks like one dear to the President Bola Tinubu administration. His signing into law Electricity Act 2023 immediately he assumed office testifies to his commitment to reviving the sector.
The new law, considered by some players in the sector as the game-changer, provides a framework that guides the post-privatization phase of the Nigerian Electricity Supply Industry and encourages private sector investments.
It also mandates electricity-generating companies to generate power from renewable energy sources, purchase power generated from renewable energy or procure any instrument representing renewable energy generation.
The act enables states, companies and individuals to produce, transmit and distribute electricity promoting empowerment in the energy sector.
In simple terms, the act opened up the sector. The Electricity Act was first passed in July 2022 and designed to replace the Electric Power Sector Reform Act which was signed into law by former President Olusegun Obasanjo in 2005.
It became important to draft the 2023 Electricity Act because the former extant law guiding Nigeria’s electricity sector was the EPSRA which was no longer capable of tackling the post-privatization issues in the sector.
More so as the EPSRA created a single electricity market with one sole regulator, even though electricity has always been a concurrent legislative matter. So, there had to be a total repeal, President Tinubu’s signing of the act finally made that happen.
One novel aspect of the act is that it provides for states to issue licenses to private investors who can operate mini-grids and power plants within the state; however, it precludes interstate and transnational electricity distribution.
Meanwhile only Lagos, Edo, and Kaduna States currently possess electricity market laws and can independently regulate their markets, while other states without such laws will be regulated by the NERC in terms of electricity generation and transmission.
Improving power supply
The absence of infrastructural development has remained a serious challenge in the sector. Hence, despite privatisation of the sector in 2013, the power supply has not improved, with the average daily supply capacity still below 4GW. There are indications that the current administration plans to solve this challenge.
To this end President Tinubu and German Chancellor Olaf Scholz on the sidelines of the COP28 climate summit in Dubai, United Arab Emirates, early this month witnessed the signing of an accelerated performance agreement aimed at expediting the implementation of the Presidential Power Initiative to improve electricity supply in Nigeria.
The agreement was signed by Kenny Anuwe, the Managing Director and CEO of FGN Power Company, and Ms. Nadja Haakansson, Siemens Energy’s Senior Vice President and Managing Director for Africa.
According to the President’s spokesperson, Ajuri Ngelale, the agreement will see to the end-to-end modernization and expansion of Nigeria’s electric power transmission grid with the full supply, delivery and installation of Siemens-manufactured equipment under the timeline of 18 to 24 months.
It will also ensure project sustainability and maintenance with full technology transfer and training for Nigerian engineers at the Transmission Company of Nigeria.
Ngelale further disclosed that Anuwe said Siemens Energy has been effective in delivery of crucial equipment worth over 63 million Euros to the country since the project commenced.
He listed items delivered already to include 10 units of 132/33KV mobile substations, 3 units of 75/100 MVA transformers, and 7 units of 60/66 MVA transformers, adding that the items are currently being installed by FGN Power Company at various sites across the country.
Ngelale stated that the project will also focus on identified load demand centres with a particular emphasis on economic and industrial hubs nationwide; execution of new 330kV and 132/33KV substations in target load centres with economic priority, in addition to thousands of kilometres of overhead transmission lines to connect new substations with existing ones.
FG set to invest $13.5bn in power sector
Special Adviser to President Tinubu on Energy, Mrs. Olu Verheijen, at the weekend disclosed that the Federal Government plans to invest the sum of $13.5 billion in Nigeria’s energy sector within a year.
According to her, the administration of Tinubu in line with its “Renewed Hope Agenda”, is committed to improving the business and investment climate in the nation, including the energy sector.
“My office has since started work on key areas of reform to spur the growth of the energy sector, and which would also positively impact on the livelihood of the average Nigerian and small businesses,” Verheijen stated.
Speaking of government’s determination to reform the sector at a retreat in Abuja last week, the Minister of Power, Adebayo Adelabu said the retreat was organised to focus on the Integrated National Electricity Policy Strategic Implementation Plan in the following key areas: Electricity Market Design; Examining key challenges in governance of electricity; Risk Mitigation on gas to power; Transmission Service Provider, Independent System Operator & Super Grid; Human Resources Development & Finance of capital development.
The Minister also revealed that TCN will be unbundled into TSP and ISO to advance the growth of electricity in Nigeria.
Also speaking, the Minister of Budget and National Planning, Abubakar Bagudu disclosed that electricity is part of the long-term plan of Agenda 2050 for the country and noted that the outcome of the Ministry’s retreat will, expectedly; help to revolutionize the power sector.
On his part, the Minister of Finance and Coordinating Economy, Wale Edun, said that power is a catalyst for economic growth and noted that about 40 percent of Nigerians do not have access to electricity, and that the situation is not acceptable to the present administration of President Tinubu.
He enjoined stakeholders in the power sector to work together to move the sector forward.
FG plans synergy with states
Meanwhile, Adelabu has revealed that the Federal Government is willing to collaborate closely with state ministries of power/energy to tackle challenges in the distribution segment of the industry.
The Minister who disclosed this when he met with the Governor of Abia state, Alex Otti said, “As Minister of Power, I stress the crucial role of state governments in transforming the power sector. State involvement is essential for improving infrastructure, reducing metering gaps, enforcing bill collection, rural electrification, tackling power theft, and securing right-of-way for transmission lines.
“To enhance state involvement, we’re exploring the idea of unbundling regional DisCos into different states for more localized oversight. We’re also looking into financial collaboration between federal and state governments, potentially involving a swap of stakes in DisCos with state stakes in the Niger Delta Power Holding Company.
“Our vision includes active collaboration in rural electrification. I encourage states to establish rural electrification boards in coordination with our Rural Electrification Agency. State support in providing distribution transformers and replacing weak power lines is crucial for maintaining reliable power supplies.”
Raising funds for further investment
Obviously, the Nigerian electricity supply sector is plagued by challenges that have affected its capacity to meet the country’s energy needs.
However, there are indications that the government is poised to solve not only to improve its power supply but also to lead in clean energy adoption in the region.
Good enough, development partners, like the World Bank, and others such as the German and Japanese governments have committed to and are currently financing projects to accelerate adequate electricity supply in Nigeria. These institutions have restated their commitment to support the country.
In addition to the efforts made by development partners, the Federal Government is driving infrastructural development and interventions that will improve the power supply. However, the government and development partners cannot meet the financing requirements for Nigeria’s electricity targets alone, hence the urgent need for the government to create an enabling environment to promote private-led investments in the energy sector.
To this end the Federal Government’s recent disclosure of its plans to relinquish its 40 percent holdings in the DisCos through listing the same in the capital market is a welcome development.
Director General of Bureau of Public Enterprises, Alex Okoh had said that it intends to sell remaining 40 per cent shares of the government in electricity distribution companies on the capital market in 2024.
Okoh who disclosed this during a media chat in Abuja said the original intent of the government following the partial privatisation of DisCos was to list its 40 per cent on the stock market in a bid to democratise its ownership to more Nigerians, not just a core group of investors.
“One of the original intentions of the way that the partial privatisation of the Discos was done was to be able to list that 40 per cent that is still being held by the government in the stock market. And that way you are democratising the ownership of these government entities,” he explained.
After all, listing the DisCos shares on the stock market will not only improve their management it will also boost the Nigerian Exchange Limited’s market capitalization while creating wealth for investors and as well make it easy for them to raise funds to invest in the much-needed infrastructure to stabilize the sector.
The government should not limit the listing to only DisCos, the generation companies as well as the transmission must equally be taken to the Exchange. That way they are bound to become efficient in not distant time.
NLC rejects TCN privatisation, demands policy reversal
However, the Nigeria Labour Congress has kicked against the proposed plans by the Federal Government to restructure the Transmission Company of Nigeria.
In a communiqué signed by the President of NLC, Joe Ajaero, said that the proposed privatisation plan of TCN would portend great danger to the power sector and hold great fear and trepidation for major stakeholders within the sector.
“However, the government and development partners cannot meet the financing requirements for Nigeria’s electricity targets alone”
Ajaero said, “The intended power sector policies would create the same mistakes past administrations made and it would create deeper consequences if power sector policies were not reversed by the Federal Government.
“It imperils the ability of the state to control, always regulate and guarantee the safety of the nation’s grid system.”
According to the NLC president, these same stories that Nigerians have heard over the years have largely yielded no significant results except the increased suffering that the exercise caused for Nigerian people and the economy.
He further explained that the motive behind the plans for the proposed restructuring was to prepare the TCN for eventual takeover by the cronies and lackeys of the ruling elite.
“NLC believes that the President is making the same mistake previous administrations have made with the policy direction his Minister of power is trying to follow in seeking to unbundle TCN for privatisation,” he stated.
Ajaero stated that NLC had thought that the President would have convened a genuine national stakeholders’ forum to critically review the privatisation exercise in the sector which the government itself agreed had failed to attain any of its major objectives.
He asserted that the disaster that would befall the nation’s power sector would be multidimensional.
“The quest to ultimately hand over the transmission infrastructure would expose the nation to blackmails and weaken the ability of the sector to transmit and distribute power around the country. Privatising it will create the same crisis prevailing within the Discos and Gencos and will impact the quality-of-service deliverance by the Power sector to Nigerians.
“We protested against a nation that was hell-bent on committing suicide in the power sector 10 years ago, alongside the consequences that privatisation exercise was going to be for the power sector and for Nigerians, but it was not heeded,” he noted.
According to Ajaero, Nigerians have witnessed a 500 per cent tariff increase yet; there is no improvement in services to Nigerians.
“The power sector remains stagnant as no significant investment was made by those who bought the GENCOs and DISCOs through proxies. What we are reaping today are the unfortunate outcomes of the errors of yesterday and it is obvious that we are bent on going the same route,” he claimed.
According to the NLC President, the power sector has been handed over to banks due to proxy
“The government’s plans, especially given Nigeria’s current status as a power poverty leader, will worsen the nation’s power sector and have significant negative effects on the overall economy and socio-economic condition,” he explained.
