In the first part of this article last week, we made a strong and impassioned case for President Bola Ahmed Tinubu to rise to the occasion once again to take some major decisions to move the Nigerian economy forward against the background of persisting problems in the foreign exchange, downstream oil and gas, and electricity markets in Nigeria, as well as the challenging issues of mineral theft. The article took a firm stand against the continuation of fuel importation when the private-sector-owned Dangote Refinery is able to locally refine and supply all our petroleum products requirements. It is gratifying to note that the Nigerian National Petroleum Corporation Limited (NNPCL)-owned 60,000 barrels per day old Port Harcourt Refinery has come on stream since that article was written, thereby signifying perhaps an end to the importation of petroleum products, as NNPCL will now be expected to focus on local refining instead of the importation of fuel, as it seeks to bring on stream its three other refineries.
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The focus of this present article is on the power sector, where President Tinubu needs to be very decisive and urgent too. The power sector and the iron and steel industry are the two major components of the backbone of a modern industrial economy. The failure of our power sector in the last four to five decades has been the major reason for the phenomenon of de-industrialisation in Nigeria, and the combined crises in the power sector and the foreign exchange market in the last twenty-four months are responsible for the exodus of a large number of manufacturing multinationals from Nigeria.
“The power sector and the iron and steel industry are the two major components of the backbone of a modern industrial economy.”
The Electric Power Sector Reform (EPSR) Act 2005 was a major, even heroic, effort to restructure the Nigerian electricity sector and set it on a path of sustainable growth, driven by the privatisation of generation and distribution assets in the power sector. The Transmission Company of Nigeria (TCN) was also given to a management contractor on a concession basis. However, there has been a great deal of pushback against privatisation in the power sector by vested interests in the public sector, comprising largely politicians, public sector technocrats, and industrial unions. This has been responsible for the limited success of the privatisation programme, and the power distribution companies (DISCOs) have borne the brunt.
The Electricity Act 2023 is a major effort to consolidate all government policies, programmes and institutions in the power sector. It is also remarkable in de-monopolising electricity generation, transmission, and distribution by empowering state governments to create their own electricity markets, license operators, as well as regulate their subnational markets. The Act also strongly promotes renewable energy as a veritable avenue to decarbonisation and achieving net zero emissions. However, the Act is silent on completing the privatisation of government assets in the power sector. I think it is inappropriate and misleading to hype the Act as “post-privatisation,” as 40 percent of the equity of DISCos is still in the hands of the Federal Government, and until those shares are sold to the general public through Initial Public Offering (IPO) at the stock market, the DISCos will not have the required liquidity they need for optimal commercial performance. Similarly, the Transmission Company of Nigeria (TCN) needs to be urgently privatised, or else the Nigerian Electricity Supply Industry (NESI) is doomed to perennial epileptic performance. The National Grid has collapsed 11 times in 2024 and 105 times in the last 10 years.
The Electricity Act 2023 requires the incorporation of an Independent System Operator (ISO) and the transition of TCN to ISO. An ISO is an organisation that manages, monitors, and coordinates an electric grid in a defined geographical space, which could be a region within a country or an entire country. For example, there are 12 distinct transmission planning regions in the United States, but only six of them are full-fledged regional transmission organisations (RTOs) or independent system operators (ISOs). In our own case, only TCN will assume the role of an ISO in Nigeria when the ISO is eventually incorporated.
President Bola Ahmed Tinubu needs to act swiftly to ensure the incorporation of the Independent System Operator (ISO) and the transition of TCN to its new assigned role as ISO, in addition to its continued provision of a national grid backbone. After the ISO is established, the process of its full privatisation should be quickly set in motion. Nigeria can learn from the privatisation of the United Kingdom national grid operator, the National Energy System Operator (NESO), which is quoted on the London Stock Exchange and even operates in the United States energy market.
Read also: The Nigerian economy under the watch of president Tinubu’s administration
Without the full privatisation of the government assets in the Nigerian power sector, the expected private sector investments will not come. The government also has neither the financial muscle nor the technical know-how to operate our national grid effectively. In fact, the national grid is currently in its worst state of crisis, and there is no other viable solution to rescue it than to privatise it. Unless we fully privatise the power sector, the Nigerian economy will remain permanently in the doldrums and in perpetual crisis. All the heroic effort to liberalise the foreign market will go to waste as Nigerian manufacturers will remain uncompetitive and unable to contribute significantly to export earnings. Furthermore, foreign direct investments (FDIs) will not flow in; instead, more companies will consider closing down and leaving Nigeria. A vibrant power sector is not possible without full privatisation, and a strong manufacturing sector is not possible without a vibrant power sector. If the President wants his economic reform programme to make sense, not go to waste, and achieve desired results, he needs to seriously consider the full privatisation of the power sector.
Mr Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos
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