POWER SECTOR REFORMS IN NIGERIA

BY

PAUL OKE

 

Power plays a critical role in the development of nations globally.  This is so because every aspect of life – social, economic and industrial development – is linked to the availability of power.  Any nation with epileptic energy supply could be said not to be ready for development and risks losing potential investors.

Nigeria has a long history of power supply problems.  Electricity generation in the country varies from gas-fired, oil-fired, hydroelectric power to coal-fired stations with the gas fired systems taking precedence.

In spite of all these options available to Nigeria, the country is still witnessing frequent and persistent power outages as a result of inefficiency in the supply of electricity to consumers. It is against this backdrop that in the year 2000, the administration of President Olusegun Obasanjo embarked on power sector reforms by unbundling the National Electric Power Authority, NEPA, the organisation responsible for the supply of electricity in the country. The government privatized its units and established a regulatory agency.

With the reforms, NEPA gave way to what is now known as Power Holding Company of Nigeria, PHCN, with seven generation companies, one transmission company, an electricity distribution company and the entry of Independent Power Producers. The objective of the reforms is to eliminate corruption in the system, make the sector more efficient, effective and responsive to the yearnings of the people. The reforms are geared toward reducing the scope of monopoly and control of the nation’s power industry and encouraging private sector participation.

So far, the Nigerian Electricity Regulatory Commission has licensed over thirty Independent Power producers. Despite all these, only a little improvement has been noticed in power supply.

Over the years, the Nigerian government has sunk billions of naira into the power sector without commensurate impact on the socio-economic development of the country.  Some of the reasons responsible for this are endemic corruption, mismanagement and diversion of funds as well as abandonment of projects by contractors handling various power projects.

Worried by this phenomenon, the government decided to fast track the implementation of the power sector reform. Two committees were put in place. They are the Presidential Action Committee on Power and the Presidential Taskforce on Power, with the responsibility of providing leadership, guidance and determining the general policy direction and strategic focus of the power reform.

The road-map for the development of the sector was launched in August 2010, by President Goodluck Jonathan who identified tariff as the critical factor in resolving the value chain of supply of electricity and canvassed for a tariff structure that would give incentives to investors.

The road-map also places the responsibility of generating and distributing power on the private sector while government retains transmission with private sector management.  To complement this, coal is to be exploited in the next few years for use in power plants in Gombe, Kogi, Enugu and Benue states.

The problem of gas supply, which is central to the successful implementation of the reforms, is being tackled in order to move the sector forward.  The government has successfully negotiated with major oil companies for an increase in gas supply to the sector.

However, for the reform programme to bring about the needed positive results, the government should ensure a level playing field for the independent power producers and the other genuine investors in the power business. Secondly, the regulatory agency must be truly independent and must be effective, efficient, unbiased in its role and corruption-free. In addition, consumers of electricity should be provided with a good education on the most efficient use of energy and be prepared to pay for any amount of energy consumed.

With the renewed determination of the present administration to meet the power needs of the nation, through massive investment in the sector, it is expected that in no distant future, Nigerians will begin to enjoy adequate, reliable, affordable and safe electricity supply.

 

Broadcast on Thursday May 27, 2011

 

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