Nigeria’s power sector stuck at 4000mw 8yrs after privatisation

Nigeria’s beleaguered electricity sector passed the milestone of eight years under private ownership this month, but the dream of constant power supply to customers still remains just – a dream.

The sector was privatised in November 2013 in a blaze of celebration and raised expectation, but power generated and made available on the national grid, which clocked between 3500MW and 3834MW then, has remained stuck at an average of 4089MW eight years after.

Data from the Nigeria Electricity System Operator put generation sent on the grid on November 1 at 3844.3MW.

Eight years after privatisation, generation is yet to match the installed capacity of 13,014.14MW. Thermal plants with four turbines can only turn one on due to gas shortages. Gas producers prioritise selling to industries because their invoices stand a better chance of being settled.

The creaking grid with a transmission wheeling capacity of 8,100MW cannot move more than 5,000MW without the entire system cranking up. This year alone, the grid has collapsed half a dozen times.

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The reliability of the national grid has fallen significantly in the years that have passed, and today Nigeria experiences wild swings in the amount of power passing through the grid.

Apart from the landmark of eight years in private hands, several other rules underpinning the electricity sector are also expiring or coming for review.

The licence of the Nigeria Bulk Electricity Trading company (NBET) is up for review, yet the organisation still lacks the capacity to muster the requisite capitalisation to guarantee big ticket transactions that is its core mandate.

Eight years after operations, it has yet to even publish an audited account statement as its role has been reduced to setting invoices for which it struggles to pay half to generation companies.

By next year, the 15-year multi-year tariff order (MYTO) will be due for review, providing a perfect opportunity for an overhaul of the sector that has continued to under-perform but the shadow of labour-induced strike action hangs over any discussion to charge tariffs that guarantee commercial returns.

In addition, all commissioners of the Nigerian Electricity Regulatory Commission (NERC), the sector regulator except one, will have their tenure expire in February next year. The Distribution Companies (DisCos) have a new deadline of next year to meet all their monthly bills, but experts say the distribution firms are nowhere near meeting this requirement.

According to energy economist, Ifie Okafor, “Nigeria’s electricity sector remains bedevilled by under capitalisation and the failure to ramp up the amount of power put on the national grid.

“The DisCos are failing in putting in the required capital to cover working capital and the badly needed capex for the nation’s power distribution network. Take out the CBN and its innovative intervention; the power sector would have long collapsed completely.

“And we still have to rely on private generators producing as much as 20,000MW of power and about 8,000MW of that is from high capacity industrial generators polluting the environment massively in a country where only 25 percent of its power generation comes from hydro-related sources. That is totally unacceptable.”

Besides changing ownership, not much has changed in the sector since its privatisation, experts say.

“The power sector in Nigeria may have been liberated from state bureaucracy. However, the power sector still has to contend with a number of legacy challenges. These include but are not limited to gas supply, liquidity issues, need for adequate metering, unpaid electricity bills, and an ailing transmission network that limits the power sector players,” Olufola Wusu, partner/head of Oil and Gas Desk at Megathos Law Practice, states.

Owners of the DisCos are holding onto the assets that have continued to decay. There has been one transaction involving Jos Electric and the long awaited transaction involving Abuja Electric has yet to happen.

“Today, after the DisCos manage to pay the monthly salaries of staff, there is usually no other money to invest in improvement of network,” notes Kunle Kola Olubiyo, president, Nigeria Consumer Protection Network.

Olubiyo says after eight years, Nigeria does not have accurate customer data and is conservatively put at between 8 million and 12 million, which could have moderated tariff rates if all customers were captured.

Half of electricity customers are yet to get prepaid meters despite several metering programmes by the sector regulator, the NERC, and millions of naira support from the government.

Since 2013, the Nigerian government through the Central Bank has provided intervention funding for the power sector up to the tune of N1.6 trillion, and the lack of adequate returns has compelled the Central Bank to demand a line of sight to bills paid by customers.

Nigeria is now banking on support of multilateral organisations like the World Bank and the recent deal the country signed with German electricity company Siemens to increase generation and raise distribution capacity three-fold to 11,000MW by 2023 at the cost of over $3 billion.

“It has been 8 years of ups and downs, learning and unlearning,” notes Adetayo Adegbemle, founder of PowerUp, a consumer rights advocacy group.

The Nigerian government is on the verge of amending the Electricity Sector Power Reform Act, the law upon which the privatisation was based, and the Ministry of Power has said it would train its focus on commercialising the sector moving away from paying subsidies, developments could yet redeem the creaking privatisation programme.