This article aims to continue the campaign for the full privatisation of the Nigerian economy, which is an imperative if we sincerely want to get our economy out of the woods and give it the momentum it urgently requires. The article is a follow-up on the December 2, 2024 article, titled, “The Nigerian economy: Another moment for the president to be decisive (Part 2).” The last paragraph stated thus: “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.
Read also: Tinubu’s quest to overcome the power sector gridlock
I must commend the Honourable Minister of Power, Mr Adebayo Adelabu, for the great job he is doing to address critical challenges in the power sector. However, listening to his 2025 power sector budget defence presentation before the Senate Committee on Power recently, I couldn’t help but remember the concluding paragraph of my December 2, 2024 article as repeated above, which I am very sure resonates with the Honourable Minister against the background of his excellent academic and professional background. The national grid collapsed eight times, according to the minister, five of which were full collapses. He said he inherited a dilapidated national grid. The question that comes to mind then is why did the previous regime cancel the Manitoba Hydro management contract to manage the Transmission Company of Nigeria (TCN), and what did they do with TCN for eight years? Nigeria’s power distribution infrastructure is equally weak. This is essentially because of the poor liquidity of the electricity distribution companies (DISCOs) due to the continued ownership of 40 percent of the shares of the companies by the federal government, partial cost-reflective pricing of power supply, and the huge legacy metering gap. The Presidential Metering Initiative (PMI), which is expected to deliver 2 million meters every year for the next 5 years, is a great step in the right direction in this regard. Until these three factors that hinder liquidity in the power distribution sector are fully resolved, the challenge of weak distribution infrastructure is likely to linger.
“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.”
The Presidential Power Initiative (PPI), which is the bilateral agreement with the German government to strengthen Nigeria’s power transmission infrastructure in the medium term, is commendable but has suffered years of bureaucratic delays, which is one of the drawbacks of direct government management of the economy. It is hoped the Federal Government will fully commit to disbursing the US$800 million for transmission infrastructure upgrades under the Siemens project. This, however, should be considered a medium-term effort that should be replaced with the full privatisation of our transmission infrastructure. This no doubt was the Buhari government’s effort to find a solution to the termination of the Manitoba agreement to manage TCN, but a nation cannot mortgage the management of a critical sector of its economy to a foreign country on the basis of a bilateral agreement. We should simply ask ourselves, what would a country like Iran, China, or India have done in the circumstances?
The allocation of N2 trillion to the power sector, according to the minister, in the 2025 appropriation bill, is commendable, but it still remains grossly inadequate in dollar terms, as far as the needs of the power sector’s weak transmission and distribution infrastructure are concerned.
So the medium- to long-term solution to the challenges of the Nigerian power sector remains full privatisation. The Federal Government should simply replicate in the power sector the common-sense decision it took to fully deregulate and privatise the Nigerian communication sector. There is no medium- to long-term viable alternative.
According to Mr Adelabu, in his budget defence presentation, the population of Nigerians without access to electricity reduced from 41 percent in 2023 to 36 percent in 2024. Power supply also increased by 35 percent (not 30 percent) from 4,100 megawatts to 5,528 megawatts. This pales in significance compared with what our peers in Africa have achieved. South Africa in the first half of 2021 had 52,600 MW power capacity; Egypt’s power generation capacity recorded 59,063 megawatts in December 2020, while Algeria produced 24,654 MW in 2024.
Read also: Liquidity issues in the Nigerian power sector and urgent need for government intervention
There is no way Nigeria can achieve energy security and produce the required energy to power our economy to continental and global competitiveness with the incremental approach of the federal government with government ownership and management of power assets that can best work to achieve efficiency, effectiveness, and optimal performance under private sector ownership, management, and control. It is imperative that the federal government totally hands off by selling off its 40 percent ownership of DISCOs to create liquidity; fully sell off TCN as well as accelerate the privatisation of the ten National Integrated Power Plants under the management of the Niger Delta Power Holding Company; and ensure that the shares of all privatised power companies, including the DISCOs, are quoted at the stock exchange. The government has neither the resources nor the technical know-how to effectively manage the power sector. The private sector does. The President needs to act fast so that his economic reform programme can gain traction and momentum.
Mr Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
