Nigeria’s Power Sector Faces Uncertainty as Decade-Long Privatization Deal Nears Expiry

Nigeria’s power sector is facing growing concerns as the 10-year privatization process, which commenced on November 1, 2013, is set to expire on October 31, 2023. Despite government interventions, the country’s power industry remains plagued by longstanding issues.

For over six decades, Nigeria’s electricity value chain, spanning distribution, generation, and transmission, has been riddled with challenges. The government initiated reforms with the 2005 Electric Power Sector Reform (EPSR) Act and subsequently launched the privatization process in 2013, hoping to alleviate the persistent power crisis.

A decade later, the problems in the power sector remain unsolved, severely hindering Nigeria’s economic progress. Electricity distribution companies grapple with liquidity problems, low remittances, and metering gaps, while generation companies struggle with inadequate investment and transmission deficiencies, resulting in frequent grid collapses.

Despite a population of over 200 million people, Nigeria has struggled to provide just 5,000 megawatts of electricity daily. According to the Nigerian Electricity Regulatory Commission’s (NERC) second-quarter report for 2023, the generation capacity of 26 power plants has dropped to 4,387.91MW.

Furthermore, the sector has incurred substantial annual capacity payment losses. In 2015, 2016, 2017, and 2018, these losses amounted to N214.93 billion, N273.32 billion, N236.47 billion, and N264.08 billion, respectively. In 2019, 2020, 2021, and 2022 (January – August), the sector’s annual capacity payment losses were N256.97 billion, N266.10 billion, N159.86 billion, and N88.13 billion, respectively.

Government interventions, such as loans and assurance funds, have failed to remedy the situation. This ongoing power sector crisis has had a significant negative impact on the Nigerian economy, with industries, such as manufacturing, suffering annual losses amounting to trillions of naira.

Hopes are now pinned on the 2023 Electricity Bill signed by President Bola Ahmed Tinubu on June 9. Stakeholders believe that its implementation may finally bring about the much-needed change in the sector. However, it is imperative that Nigeria’s Minister of Power, Adebayo Adelabu, provides the necessary policy direction for the sector’s transformation.

Wumi Iledare, Professor Emeritus and Executive Director of the Emmanuel Egbogah Foundation, emphasized the importance of proper implementation of the Electricity Act and advocated for decentralization and effective regulatory institutions at both state and federal levels.

Kunle Olubiyo, the President of Nigeria Consumer Protection Network, criticized the power sector privatization framework, highlighting the need to appraise licensees’ performance and key performance indicators. He called for the government to take action as the 10-year moratorium expires.

Adetayo Adegbemle, Convener and Executive Director of PowerUp Nigeria, stressed the importance of reviewing the power sector privatization agreement to reposition the industry. He pointed out that certain low-hanging fruit issues, including metering and balancing generation, transmission, and distribution, must be urgently addressed to improve the sector. The review of the regulatory framework will determine the Nigerian government’s next steps in addressing the power sector’s challenges.