Many who are now adults grew up screaming “Up NEPA!” each time the then state utility, the Nigerian Electric Power Authority (NEPA), restored power supply, sometimes after days of power cuts. Now their children are still raising the chant indicating that it is not yet Uhuru for Nigeria’s power sector.
Nearly six decades after independence, Africa’s largest economy has been unable to keep the lights on for millions of its populace beyond five hours a day outside major city centres, a development that sees Nigeria import more generators for household power supply than any other country in the world.
The rule of thumb for an industrial nation is about 1MW for every thousand of population. Therefore, Nigeria’s energy need is about 190,000MW for a population of 190 million, but the most the grid offers is a paltry 4,000MW on good days. Nigeria’s highest ever peak output was Thursday, 7 February 2019 at 21.00hrs when the Transmission Company of Nigeria (TCN) announced that the national grid had successfully transmitted a new generation peak of 5375MW.
Analysts have blamed issues of vested interest, lack of collaboration, corruption, low tariff, energy theft and many years of decay the ineffectiveness and inefficiency that have dogged the power sector for several decades.
The history of Nigeria’s chequered power sector started in 1896 when the first (20MW) power plant was built at Ijora, near Lagos. A structure began to emerge in 1951 with the formation of Electricity Corporation of Nigeria (ECN) to regulate electricity supply and generation. By 1960, the Niger Dam Authorities (NDA) set up to manage dams in Nigeria with a total installed capacity of 50MW.
To consolidate pockets of power generation in different areas, in 1972, NDA and ECN merged to form NEPA, a state-owned vertically integrated power utility that held sway till 2013 with the privatisation of assets of the Power Holding Company of Nigeria.
NEPA was bogged by years of poor investment, inadequate maintenance of power assets, a bloated labour force and government subsidies that fed Nigerians the notion that electricity should be free.
The Federal Government privatised the sector in 2013 modelling it after India’s power sector privatisation. This led to the creation of 11 power distribution companies managing the downstream operations and five generating companies acquiring power generation assets.
Five years after privatisation which earned the Federal Government about $3 billion, the Nigerian government has provided about $10.33 billion, according to BusinessDay calculations, in the form of intervention funding and loans to the players. Actual power supply has risen from about 2900MW to between 3000MW and 4000MW on average. Nigeria’s population grows at over 2 percent annually so entire cities report power cuts that last for weeks.
The power privatisation policy was organised to have the distribution companies (DisCos) who would collect and pay the Nigerian Bulk Electricity Trading (NBET) plc, who will then pay every other operator in the value chain – generation companies (GenCos), gas companies (GasCos) and the Transmission Company of Nigeria (TCN). It was assumed that the DisCos would collect a cost-reflective tariff hence a Multi-Year Tariff Order (MYTO) was developed.
However, “the challenge was assumptions that fed into tariff changed”, said Chuks Nwani, an energy lawyer. And DisCos began to default badly. Inflation jumped from single digit, gas prices rose and foreign exchange went through the roof. This set in liquidity challenges in the system.
Operators say the regulator, the Nigerian Electricity Regulatory Commission (NERC), erred by failing to enforce sanctions on defaulters. DisCos withheld more than they should without penalties and political interference marred the process.
Analysts say the privatisation exercise was abused towards the end, when the competent people driving the process were fired and replaced with those pliable to special interests, the regulator was weakened and became susceptible to political interference and the DisCos became the enfant terrible of the electricity market.
By 2 February 2016, power generation which rose to 5074MW crumbled when Niger Delta militants blew up the Forcados pipeline which fed gas to all the critical gas-fired plants in the country and Nigeria’s power sector collapsed.
Babatunde Fashola, former minister of power, works and housing, began an incremental power programme. In 2017, the government secured approval for a Power Sector Reform Implementation Programme along with the World Bank and African Development Bank for a $7.6 billion funding for the sector and began a phased implementation of aspects of the programme.
The same year, Fashola announced that Gencos could now sell power directly to eligible customers and a competition transition charge was arranged to assuage the concerns of the DisCos that they will lose huge market share.
NERC has approved a mini-grid regulation which has provided an opportunity to deepen energy access for rural communities. The Rural Electrification Agency (REA) is ramping up efforts to help communities without access to the grid or those who are underserved to get power through renewable energy sources.
In 2018, NERC approved a Meter Asset Provider policy to stop the DisCos from billing customers using their discretion.
Analysts say more of these reforms are needed to get the power sector out of the current situation.
“We need to make tough decisions and elevate long-term planning above politics, nepotism and vested interests,” said Ayodele Oni, energy partner at Lagos-based Bloomfield Law Practice. Oni counselled that the DisCos need to clearly list what their challenges are and the regulator should listen.
“These will be things such as a cost-reflective tariff and ensuring a national grid that can wheel out generated electricity. On the other hand, the regulator needs to adopt a robust carrot and stick approach, with clear Key Performance Indicators (KPI) and enforceable sanctions,” Oni said.
“This might mean that the performance agreement contracts will have to be reopened and reviewed, and we really have hit the reset button in the power sector and get serious,” he said.
In August, the regulator signalled an intention to begin to address the lack of cost-reflective tariff by reviewing the MYTO electricity pricing template which raises the price on average by 30 percent. Reforms have also been announced to help the TCN deliver better wheeling capacity.
In July, a power agreement was signed between the Nigerian government and Siemens, a leading German electric company, that will see the German company upgrade transmission and distribution networks which could double Nigeria’s electricity generation and raise distribution capacity three-fold to 11000MW by 2023
President Muhammadu Buhari said he directed Siemens to fix the power distribution and transmission aspect of the electricity challenge in a road map brokered by German Chancellor Angela Merkel when she visited Nigeria in 2018. Analysts are optimistic that such collaborations may help dent Nigeria’s poor power output.
But an operator who was an executive director in the defunct National Electric Power Authority (NEPA) said when Nigeria is ready for electricity, it would go for it.
“I don’t believe Nigeria is good enough for steady power supply. The tariff is not right and there is huge energy theft, yet the government is telling investors to go to court. How can there steady power supply?” said the operator who does not want his name mentioned.
OLUSOLA BELLO, ISAAC ANYAOGU & STEPHEN ONYEKWELU
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
