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Revisiting Power Sector Privatisation



Recently, the federal government ordered electricity companies to provide uninterrupted supply to Nigerians or make way for serious operators. Minister of power, works and housing, Mr Babatunde Fashola, SAN, expressed worry at the activities of some operators and insisted that government would not relent in its efforts to salvage the sector. He said the number of complaints coming to government for meters, which the electricity distribution companies (Discos) should supply, complaints about estimated billings and mass disconnections cannot continue.

The federal government also lamented that its vast investment in the power sector is not translating to improved power supply in the country because the Discos do not have the capacity to effectively distribute electricity generated by Gencos.
The situation with Nigeria’s power sector calls for sober reflection. The sector is ridden with so much corruption; it has been a bottomless pit where successive administrations have sunk so much money with little impact.
After spending billions of dollars to improve the nation’s power sector, electricity supply is still below 5,000 megawatts (mw), even though the government said the nation has the capacity to generate 7,000mw. The United Kingdom with a population of about 30 million generates 80,000mw. Germany with 30 million population generates 120,000mw and South Africa with 60 million population has 40,000mw. Nigeria with estimated 198 million population generates a paltry 7,000mw.
The sector appears to have turned into a drain pipe on the nation’s scarce resources. For instance, during the administration of former President Olusegun Obasanjo, the sector reportedly gulped a whopping $16 billion. Also, the administration of former President Goodluck Jonathan embarked on a power sector privatisation which has variously been described as fraudulent and lacking in due diligence. The exercise involved the sale of the over N480 billion assets of the defunct Power Holding Company of Nigeria (PHCN) to private investors comprising 10 Discos and four generation companies (Gencos) with a view to increasing consumers’ access to electricity. Yet, since the investors commenced operations in 2013, electricity supply has consistently been below 4,500 megawatts.

Again, the federal government, through the Central Bank of Nigeria (CBN), approved N701 billion funding support to the investors to enhance power supply. Also, Fashola recently disclosed that the federal government had pledged to invest N72 billion for the procurement and installation of equipment to assist the Discos in the distribution of the 2,000 megawatts of stranded electricity. We condemn government’s continuous disbursement of scarce public funds to assist private investors. These are government’s resources that could have been more judiciously used in other sectors. There is a need for a transparent review of the privatisation exercise. Lately, the media has been awash with accusations and counter-accusations between the minister of power and the electricity distribution firms. While the minister accused the Discos of sabotaging the nation’s economy through their actions, the Discos contended that his comments on metering, power generation, transmission capacities and stranded electricity, among others, were significantly distorted. At this time Nigerians crave for stable power supply and not a public quarrel that does not bring any solution. Questions have been raised about the capacity of the Discos to deliver, and many of the Discos have admitted that they did not have quite a good knowledge of the situation in the sector at the time they were investing.

Nigeria’s power sector requires robust policies and stakeholder collaboration to make the sector more bankable to facilitate fresh investments to drive expansion and growth. It is our considered opinion that reversing the privatisation of power sector seems to be the best option in the circumstances the country finds itself with its electricity industry; it is in the national interest to do so. This is necessary in order to redirect the process and provide a level playing field for all investors. That way the country will be able to attract the kind of investors that will provide the value the country has been yearning for. The power industry, as it is today, cannot be said to posseess the appropriate organisational conditions necessary for the efficient and effective running of the industry. Experts said the lack of proper organisational structure has badly affected the performance of the industry vis-à-vis the proper functioning of the electric energy supply chain (generation-transmission-distribution), and because of this, it fails to achieve maximum value from the resources made available to them to provide regular power supply. We believe government needs to take urgent steps to review the privatisation of the Gencos and Discos with a view to correcting the anomalies.





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