This article is a follow-up to the one from last week, titled “The Nigerian Power Sector: Time to Act is Now,” and is also written against the background of the epochal Mission 300 African Energy Summit, held in Dar Es Salam, Tanzania, January 27-28, 2025, where thirty African heads of state and government “committed to concrete reforms and actions to expand access to reliable, affordable, and sustainable electricity to power economic growth, improve quality of life, and drive job creation across the continent.” It is also against the background of the “National Energy Compact of the Federal Republic of Nigeria,” presented at the summit, which proposes the mobilisation of US$23.2 billion in financing for last-mile electrification in Nigeria by 2030. I consider the just-concluded summit auspicious because it shows that the conveners of the summit—African Development Bank, the World Bank, and the African Union—realise the urgency of addressing the power crisis in Africa, and it is a validation of the points of view this column has been canvassing for a while now.
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Last week’s article made a strong case for the president to act urgently to fully privatise the power sector as the long-term solution to Nigeria’s power crisis. The truth is that Nigeria has been experiencing an electric power crisis for decades, especially since the 1980s, due to prolonged years of military rule and the subsequent capture of the power sector by forces whose interests are at variance with the national economic interest.
The reasons President Bola Ahmed Tinubu should set aside countervailing considerations and courageously set in motion necessary policies and programmes to fully privatise the Nigerian power sector include but are not limited to the following: 1) The power sector is critical to Nigeria’s economic recovery and competitiveness. The Nigerian economy cannot fully recover from its doldrums and become competitive enough to leverage the emerging trade and investment opportunities under the African Continental Free Trade Agreement (AfCFTA) unless the power sector is fully privatised. 2) Poor power supply has crippled production, increased costs of production, and is the major cause of de-industrialisation in Nigeria, including the recent exodus of multinational manufacturing companies from Nigeria. 3) The government has neither the resources nor the technical know-how to manage the power sector. Tens of billions of dollars of investment are required every year, which only the private sector can provide. 4) Nigeria lags behind our peers abysmally in power generation, producing less than ten percent of South Africa’s and Egypt’s power generation, respectively. 5) Nigeria needs to dramatically accelerate power generation, galvanise large-scale industrialisation, and prevent further exodus of multinational manufacturing firms.
“The truth is that Nigeria has been experiencing an electric power crisis for decades, especially since the 1980s, due to prolonged years of military rule and the subsequent capture of the power sector by forces whose interests are at variance with the national economic interest.”
The benefits of privatising national power sector assets include the following: 1) A vibrant power sector will strengthen naira exchange rates—by attracting foreign direct investments (FDI) to the manufacturing sector and expanding foreign exchange earnings through manufactured exports. 2) Constant power supply will energise the whole economy and rapidly grow our gross domestic product (GDP). 3) A privatised and vibrant power sector will enable the government to focus its full attention on developing renewable energy sources, again, using essentially a private-sector-led approach, with the required policy framework and incentives. 4) Privatising power assets will unleash across-the-board prosperity in all sectors of the economy, including the agricultural sector. 5) It will be easier to achieve macroeconomic stability: single-digit inflation rate, stable and higher naira exchange rates (steep appreciation of the naira at sustainable levels), lower and affordable interest rates, cheaper foods, and a substantially improved standard of living.
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What President Bola Ahmed Tinubu should do: 1) Prioritise reform in the power sector as he has done in the oil and gas sector. To the credit of President Tinubu, the Nigerian oil and gas sector is experiencing a significant turnaround due to a number of executive orders and fiscal incentives to oil and gas investors. This shows that the most potent weapon and resources in the hands of the government to grow the economy and reposition sectors of the economy is the right economic policy framework, especially one that is market-facing and investor-friendly. That is what the Nigerian electric power sector critically needs now. The Tinubu-led Federal Government of Nigeria needs to make privatisation a major pillar of its power sector reform program. 2) The President needs to roll out executive orders to privatise all segments/value chains of the power sector where the government owns assets: 40 percent ownership of the power distribution companies (DISCOs); sell off all power generation companies (GENCOs) it owns along with other tiers of government, specifically the ten National Independent Power Plants (NIPP) under the management of the Niger Delta Power Holding Company; and privatise the Transmission Company of Nigeria (TCN), following the good example of the United Kingdom Government under Prime Minister Margaret Thatcher which privatised its National Grid Company in 1990, as part of the overall privatisation of its Central Electricity Generating Board (CEGB). 3). President Tinubu needs to roll out attractive fiscal incentives for greenfield investments in (new) power plants. Nigeria has not had a new private-sector power plant in the last decade after the landmark private sector investment that led to the construction and completion of the Azura Edo power plant in 2018, due to a hostile power sector business environment. 4). President Tinubu also needs to roll out fiscal incentives for upstream natural gas producers for the power sector. The work already being done in gas production is commendable, but more needs to be done, especially in terms of granting more fiscal incentives and accelerating the liquidation of the $2.16 billion owed to gas producers and power-generating companies. 5) Finally, the president should target a minimum of $10 billion in investments in the power sector annually through appropriate packages of privatisation and fiscal incentive frameworks.
Turning around the Nigerian electric power sector is not rocket science. All it requires is political will and a workable follow-through plan.
Mr Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos
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