Why the power sector needs reorganisation


Since the advent of the democratic regime in Nigeria, there have been significant strides in the reform of the power sector; but efforts so far have been unable to provide adequate and stable power supply in the country.

As the largest economy in Africa, it is entangled with limitations in the power sector which continue to constrain economic growth. Nigeria is endowed with large oil, gas, hydro and solar resource, and it already has the potential to generate 12,522 megawatts (MW) of electric power from existing plants with thermal and hydro capacities of 10,142 MW and 2,380 MW respectively.

Unfortunately, the sector is only able to generate about an average 4,000 MW, which is very far from sufficiency due to maintenance,gas, water and transmission constraints. Nigeria has privatized its distribution companies, so there is a wide range of tariffs.

Over the past decade, the Federal Government has been able to complete the privatisation processes while the Federal Government retains the ownership of the transmission assets (management under concession) with the generation and distribution sectors fully privatised. The Nigerian power sector privatisation by the Nigerian Electricity Supply Industry (NESI)is reputed to be one of the boldest privatisation initiatives in the global power industry over the last decade, with transaction cost of about $3 billion.

Despite the sector’s 202 trillion standard cubic feet (scf) gas reserves, Nigeria has not been able to harness enough of its gas for power generation for reasons including poor execution of projects, market liquidity challenges, capacity shortages and government’s laid-back attitudes to taking critical decisions on the sector.

Before the privatisation, reports indicated that out of the 79 generation units that the country had, only 19 were operational and average daily generation peaked at 1,750MW. The government which ran the sector reportedly built no new electric power infrastructure between 1989 and 1999.

Following the conclusion of the 2013 reforms in the sector which sought to change docile public power systems, upgrading the capacity of Nigeria’s electricity market to guarantee stability for the country has faced various challenges.Even though the reform was initiated to reposition the sector, it is yet to lead Nigeria out of unstable public electricity supply.

Reports from various agencies associated with the power sector indicated that up to about 55 per cent of the country’s citizens are yet to be connected to the national grid, while the percentage on the grid manages an average of the said 4000MW generated and transmitted daily to the grid.The Executive Director, Association of Nigerian Electricity Distributors, Sunday Oduntan, in 2018 said that Nigeria must generate at least 180,000 MW of electricity to have adequate and stable power supply in the country. Whereas, generating 1,000 MW of electricity will require about $1.2 billion.

However, between 2017 and 2018, progress was recorded in the country’s power sector while it continued to be confronted with challenges that are not well managed. Insufficient gas supply to some thermal electricity generation companies (Gencos) especially those of the National Integrated Power Projects (NIPPs) have remained an issue yet to be resolved by the country.Some measures like chronic illiquidity which impacts heavily on capacity expansionas well as government’s silence on key regulatory and market decisionshelped to ensure that the sector achieved a measured progress.

In Q4 2018, power generation was pitched at an average daily generation of 68,625 MW of energy leading to an average 2,859 MWh generated hourly by thermal power stations. On the other hand, hydro power stations generated an average hourly energy of 1,163 MWh accumulating to an average 27,193 MW daily.


Source: NBS, BRIU

Thermal stations outperformed hydro stations as they generated 1,908,870MW, 2,101,726MW and 2,302,946MW of energy in October, November and December respectively in 2018 amounting to 10.1 per cent increase from October to November, and 9.6 per cent increase from November to December. While hydro stations underplayed as they generated 934,193MW, 849,964Mw and 783,869MW respectively within the aforementioned months with declines of 9 per cent and 7.8 per cent respectively.

Source : NBS, BRIU

Monthly energy consumption increased by 4.7 per cent and 6.10 per cent from October to November, and November to December respectively in 2018 across the 11 Electricity distribution companies; this measure up to 7,062,313 MW of energy in the last quarter of 2018.

Available records showed that 16,532 prepaid meters were distributed in commensuration to the same number of customers in Q4 2018 across the discos in Nigeria owing to 1 per cent increase from 1.65 million customers in Q3 2018 to 1.67 million customers in Q4 2018.

Source: NBS, BRIU

The graph showed that the sector has struggled to sustain an average daily power production of 61,576 MW, 70,058 MW and 74,248MW in October, November and Decemberrespectively in 2018 by the thermal stations. Also, after the thermal stations and hydro stations achieved a peak power generation of 80,856MW on December 20, 2018 and 32,681MW on the 21st of October 2018 respectively, it however largely struggled to keep up with the trend by 2018 year end.

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