Operators, policy-makers, and regulatory authorities in the nation’s power sector gave an unflattering assessment of the privatization programme in the last ten years, saying it failed woefully to deliver value to Nigerians.
This was the consensus of most of the participants at the Nigeria Electricity Supply Industry (NESI) Market Stakeholders Roundtable held in Abuja on Monday to mark the 10th anniversary of the privatization programme in Nigeria.
Speakers included President Bola Tinubu; Senate President, Godswill Akpabio; Speaker of the House of Representatives, Tajudeen Abbas; Minister of Power, Adebayo Adelabu; Director-General of the Bureau of Public Enterprises (BPE), Alex Okoh; Chairman, Nigerian Electricity Regulatory Commission (NERC), Sanusi Garba, and others.
Tinubu, who was represented by the Special Adviser to the President on Power Infrastructure, Sadiq Wanka, said the privatization policy initiated to improve the efficiency of the power sector, unlock private sector investments, and unleash the potential of the nation through an energized economy, failed to meet these objectives over the last ten years.
“Over 90 million Nigerians lack access to electricity. The national grid only serves about 15% of the country’s demand. This has left households and factories to rely on expensive self-generation, which supplies a staggering 40% of the country’s demand,” Tinubu said.
Despite privatization, he said the capacity of the national grid to wheel electricity has remained relatively flat in the last ten years, with the grid capacity only increasing from over 3000MW to just over 4,000MW over the period, against the target of 40,000MW by 2020 set by the government pre-privatization.
Tinubu blamed the underperformance of the sector in the last decade on a combination of deep commercial, governance, and operational issues, saying as of Q2 2023, only 60% of every kilowatt of electricity injected into the grid was paid for.
“Many of the successor utilities of the PHCN have failed to meet their performance improvement targets due to technical and financial capacity issues. We are in a vicious cycle of under-performance and under-investment, and everyone has a different view of which value chain player should be blamed for continued sector malaise,” Tinubu said.
With only about 45% of industry customers metered today, the President said the government was committed to supporting the metering drive through the World Bank DISREP programme designed to add about 1.25 million meters and activate the Meter Acquisition Fund to procure another 4 million meters.
He proposed a plan to rebase tariffs to allow for adequate cost recovery on investments; quickly develop and execute a clear roadmap for serving profitable pools of customers; curbing energy theft; develop a gas policy for the power sector; institute a Presidential Taskforce to monitor and unblock the progress of key projects in the sector; accelerate the pace of deployment of renewables and solar and ensure all licensees have the technical and financial capacities to deliver on their licenses.
With the sector under-capitalized by about N2trn., Tinubu said the government must facilitate a reorganization and a recapitalization process to bring in new partners and new capital to jump-start performance in the critical sections of the value chain.
With the poor performance of private investors since the sector was handed over in November 2013, Minister of Power, Adebayo Adelabu, said the government was considering invoking the necessary clauses in the terms and conditions in the operators’ licenses and performance agreements under the 2023 Electricity Power Sector Reform (EPSR) Act to make the sector perform the way it is supposed to.
“There is no automatic renewable of operational licenses. Every license will be renewed based strictly on clear performance indicators. Consideration will be given to technical efficiency and capital availability,” Adelabu said.
The Chairman of NERC, Sanusi Garba, who was represented by the General Manager, Market Competition & Rates Division, Shamsudeen Mamhoud, described the privatization of the power sector as a decade of challenges and achievements, as the industry has evolved after a decade.
Despite the achievements, Garba said energy transmission and distribution have continued to pose a big functional and institutional challenge to the industry due to the state of infrastructure and capital to finance investment and expansion.
Apart from capital, he said the lack of cost-reflective tariffs has continued to affect the performance and growth of the industry value chain.
He welcomed the recent enactment of the 2023 EPRS Act, which gave state governments the power to participate in the electricity supply chain, but also regulate the sector within their jurisdictions
On the license of the distribution companies, the NERC Chairman said although the DISCOs were given an initial 10-year license, the Commission decided to extend the tenure by five more years on the commencement of privatization, giving the operators a 15-year license, till 2028.
Despite the tenure of the licenses, Garba said that as the regulator of the electricity industry, irrespective of the remaining lifespan of the licenses, NERC has the right to revoke or withdraw them for failure to comply with key performance indicators and non-compliance with the license terms and conditions.
He said notices have already been issued on the decision to revoke the licenses of some DISCOs, and in line with the provisions of the law and regulations currently reviewing the responses of the affected companies.
In his presentation, the DG of BPE, Alex Okoh, after ten years of unbundling the Power Holding Company of Nigeria and the privatization of the generation and distribution companies, “integrity demands that we admit that we are not where we ought to be, with regards to the original intendment and vision of the reforms.”
Okoh said as the anchor agency for the power sector reform in the country, which handled the legal and regulatory frameworks, including the enactment of the Nigeria Electric Power Sector Reform Act 2005; transfer of the functions, assets, and liabilities of the Nigeria Electric Power Authority to the Power Holding Company of Nigeria, and incorporation of the relevant agencies – including the sector regulator, Nigerian Electricity Regulation Commission, as well as the Nigerian Electricity Liability Management Company, the objective of the reforms have not been realized.
He described the ten years of the post-privatization period as “years of mutual non-performance by both the private sector and public entities”, characterized by huge market and tariff shortfalls and liquidity problems, imposing debt profile in the market, and other issues such as severe lack of investments, which created the challenges the sector is facing.
Although he highlighted some achievements, including increased generation capacity, improvements in grid infrastructure, regulatory certainty and quality of regulatory activities as well as a series of government interventions to improve the technical, operational, and financial positions of the DISCOs, Okoh urged participants to dialogue on the issues and challenges affecting the industry.
These challenges and issues, he said, relate to tariff adjustments, gas shortages, market discipline, financing challenges, and the need for further infrastructure investments, especially in the transmission and distribution segments of the value chain.
Representatives of both the Senate President, Godswill Akpabio, and his counterpart in the lower chamber, Tajudeen Abbas, stressed the need to inject investment, efficiency, capacity, and creativity into turning around the moribund Nigerian Electricity Supply Industry (NESI).
Akpabio, who was represented by the Chairman of the Senate Committee on Power, Enyinnaya Abaribe, said the electricity sector was fundamentally critical to the nation’s socio-economic prospects and its quest to take a leadership position in the world.
He said ten years after the privatization of the sector, inconsistent and insufficient supply of electricity has remained the bane for the nation’s inability to take its leadership position.
On the question of whether privatization has met the expectations of Nigerians, the Senate president said: “The answer would be a categorical and emphatic “No. we have not.”
Abbas, who was represented by the Chairman of the House Committee on Power, expressed the hope that resolutions from the meeting would bring creative ideas urgently needed to turn around the current limitations of NESI.
He said the lawmakers would play their role by deliberating on the resolutions and coming up with legislation that would seek to progress the sector.
“We remain committed to working with all the NESI operators and stakeholders in building an environment that will allow for the injection of the massive investment, expertise, and creativity necessary to move NESI to our collective aspiration and goal of consistent and efficient power supply,” he said.