A recent report that the Federal Government’s intervention funding for the electricity system has risen to N2.9 trillion highlights the prolonged chaos in the power sector. The report revealed that public funds injected into the sector since its privatisation in 2013 have continued to rise without commensurate improvement in electricity supply. Earlier, the Minister of Power, Abubakar Aliyu, had blamed the persistent power outages in the country on gas supply shortages and pipeline vandalism thus constraining the addition of more megawatts to the national power grid. The President, Major General Muhammadu Buhari (retd.), should heed the call to undertake a drastic review and resolve the protracted power crisis.
Problems besetting the sector go beyond gas shortages. Others are high debts, under-investment, dilapidated infrastructure, non-metering of customers and a turbulent tariff regime. Along the entire value chain – generation, transmission, distribution, and regulation – difficulties abound.
But they are not insurmountable. The problems were long known and diagnosed, and a strategy adopted to transit from state monopoly to a competitive private sector-led electricity power industry. The roots of the present crisis therefore lie primarily in the mismanaged power sector asset sales of 2013, and subsequently in the inability of the Buhari regime to untangle the mess.
Nigeria is paying dearly for the treacherous mishandling of the power privatisation by the Goodluck Jonathan Presidency, and the bewilderment of the Buhari regime. With the unbundled 11 power distribution and six generation companies gifted to incompetent, emergency firms in corruption-marred asset sales (government retained the sole transmission company), power outages have continued. Despite additional generating capacity, less than 4,000 megawattsis available for the 216 million people in Africa’s largest economy.
Between 2017 and 2020, the Federal Government said it spent a total of N1.7 trillion supporting the sector. This has been the trend after the Power Holding Company of Nigeria was broken into 18 utility firms and 17 were privatised.
Invariably, the major objectives of privatisation – attracting foreign and domestic private investment, upgrading, and acquiring infrastructure, dramatically raising power output, transmission, and distribution, stimulating economic growth, skills, and technological acquisition, and creating jobs – have not materialised.
In 2021, the Central Bank of Nigeria estimated the acquired loans by the DisCos at N819.97 billion. Some commercial banks that advanced funds for the acquisition of majority shares in the utilities, and the Asset Management Company of Nigeria have moved to take over five DisCos over bad debts.
In the 2022 national budget, N77.38 billion is to finance 74 electricity projects; 53 are new projects that will gulp N75.12 billion (97.08 per cent) and the rest ongoing ones. Despite the huge intervention funding from the government and the CBN, the crisis persists.
Buhari should muster the will to act. In June, Australia’s regulator suspended the wholesale electricity market; a radical move allowing the government to manage pricing and control of power assets and prevent blackouts. It was the latest bold direct intervention after privatisation in the 1990s failed to quickly deliver projected outcomes. Nigeria needs similar strong decisiveness in this vital sector.
The International Monetary Fund calculates that Nigerian businesses suffer losses of about $29 billion annually due to power shortages. Companies are going out of business, diesel price has surged, and companies are cutting down on production, resulting in more job losses in an economy already hit by a 33.3 percent unemployment rate, one of the world’s highest.
Fixing the crisis is not magic. It only requires creative thinking, strategic reviews, fund sourcing and foreign investments. Egypt raised its generating capacity to 59,063MW of electricity in a decade, displacing South Africa as the continent’s highest. Challenged, South Africa raised its capacity from 42,000MW to 58,000MW. But data from the Federal Ministry of Power indicate that the highest peak power ever generated and transmitted in Nigeria Was 5,802MW delivered on March 1, 2021. A 2021 World Bankreport showed that Nigeria, Congo, and Ethiopia had the biggest electricity access deficits.
The government should review the post-privatisation performance targets. It must fulfil its own obligations under the Electric Power Sector Reform Act 2005 and the subsequent roadmaps. Letting go of its own 40 percent stake in the DisCos and GenCos, it should persuade the majority investors to dilute their holdings to allow global champions to come in with funding, FDI, technical and managerial expertise.
The government can leverage its 40 percent shareholding and its control over the regulatory environment and renegotiate with the investors because power is sovital to the country’s economy.
By now, Nigeria should be building a second national power grid as well as regional grids, mini and micro-grids to distribute as much electricity as possible. Moreover, policies should drive private investment in alternative power sources, especially renewables – solar, wind, hydro, tidal, geothermal and biomass.
According to the United States International Trade Administration, Egypt’s Sustainable Energy Strategy targets 20 percent coming from renewables by year end 2022, and 42 percent by 2035. To reduce its dependence on coal-fired plants, South Africa had raised hydropower sources to 16.1 percent by 2020 and commissioned newwind (415MW) and solar (558MW) plants that year, said Enerdata, a consultancy. Similar plans in Nigeria should move from policy papers and rhetoric to resolute action.
The existing national power grid should be privatised with the government retaining a minimal stake or a ‘Golden Share.’
State governments should attract investments in power and target mini-grids and regional grids, especially in industrial hubs. Though on the exclusive legislative list, the central government has rolled out a policy allowing states, in partnership with private investors, to invest in electricity. The states should seize this opportunity. Regulators should come down hard on operators flouting laws and regulations. The DisCos should be compelled to provide pre-paid meters and stop fleecing customers with fraudulent ‘estimated billing.’ With only nine months left to exit power, Buhari should strive to leave an enduring legacy in the power sector.