Olu Verheijen, special adviser to President Bola Tinubu on energy, has revealed that Nigeria failed to conduct a thorough assessment of potential buyers during the privatisation of the power sector.
Speaking during an interview with Arise TV on Wednesday, Verheijen highlighted that the 2013 privatisation, which saw the distribution and generation sub-sectors sold to core investors, lacked the rigorous scrutiny seen in the upstream oil and gas industry.
“When privatisation happened, we unbundled our power sector, but we didn’t conduct the rigorous evaluation of buyers that we did in the upstream oil and gas industry. As a result, distribution capacity has largely stagnated over the past ten years, except for one or two DisCos,” Verheijen said.
She explained that many private investors who acquired distribution companies (DisCos) lacked the financial and technical capacity to make the necessary investments to improve reliability and expand access.
To address these shortcomings, Verheijen said the federal government is implementing regulatory and policy measures aimed at ensuring transparency, setting clear standards for ownership, and strengthening the financial and technical competence of power sector stakeholders.
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According to her, about 60 to 70 percent of Nigeria’s domestic gas consumption goes to the power sector, creating a high concentration of risk. She emphasised that diversifying the sector is essential but cannot happen without first tackling the underlying challenges from gas to power.
“We’ve made significant progress in driving off-grid access. However, you cannot industrialise, grow income, or transform your economy without improving reliability and expanding energy consumption at economic levels. This requires strengthening the on-grid system,” she said.
Verheijen stressed that investors need confidence in the sector’s financial liquidity and cash flows to deploy capital. She pointed out that the lack of financial viability in the distribution segment has been a major barrier to attracting investments.
“The first approach is to ensure that DisCos have the cash flows required for investments in reliability and growing access,” she noted.
The presidential aide identified illiquidity as the core issue affecting the power sector. She highlighted how revenue shortfalls, where DisCos are unable to collect full revenues and government commitments to subsidise these shortfalls have been inconsistent, have created a ripple effect across the value chain.
“That means generation companies aren’t paid, transmission companies don’t have enough cash flow coming back from the DisCos, and gas suppliers do not have the reliable cash flows they need from their off-taker. This has resulted in a history of debts accumulating over the past 10 to 15 years,” Verheijen explained. “
She revealed that the government has opted for a holistic approach to resolving these issues, including clearing legacy debts and ensuring that generation companies (GenCos) and gas suppliers (GasCos) are paid what they are owed.
“The government has decided to clear these legacy debts and ensure that GenCos and GasCos are paid what they are owed. This will restore investor confidence and create fresh incentives for investments in the sector,” she added.
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