Electricity provision remains inadequate a decade after privatization

 

The year 2023 marked the tenth anniversary of the partial privatization of the power sector, where the Federal Government relinquished its 60% stakes in 11 electricity distribution companies and either sold or concessioned seven power generation plants. Despite this move toward privatization, electricity supply has remained inconsistent, leaving consumers frustrated. Surprisingly, the government, attempting to divest from the sector, ended up spending over N7 trillion to support the Nigerian Electricity Supply Industry (NESI).

The power sector underwent significant changes in 2023 with the signing into law of the Electoral Act, shifting the power sector from the exclusive legislative list to the concurrent list. This allowed state governments not only to issue licenses but also to generate, transmit, and distribute electricity within their states. Adebayo Adelabu's appointment as the Minister of Power marked a unique development, as he became the first individual to administer the sector single-handedly since the advent of the present democracy in 1999.

Despite a 13,000MW installed capacity from the country's 27 power generating plants, power generation remained exceptionally low due to poor utilization. The Nigerian Electricity Regulatory Commission (NERC) reported a worrying plant availability factor (PAF) of 33.31% in 2023/Q3, highlighting the significant issue of mechanical outages, particularly stemming from the age of many plants.

The Transmission Company of Nigeria (TCN), managing the national grid, faced challenges with repeated collapses and attacks on transmission towers. The government aimed to unbundle TCN into two entities, Independent System Operator and Transmission Service Provider. Despite efforts to upgrade substations and procure new transformers, incidents like fire outbreaks and attacks on power towers persisted.

Electricity distribution companies (DisCos) continued to perform poorly, neglecting infrastructure investments and lacking in proper metering. As of September 2023, only 44.51% of registered electricity customers in NESI were metered. The Federal Government took steps to address this metering gap, opening bids for 1.25 million electricity smart meters funded by a $155 million World Bank loan.

The Rural Electrification Agency (REA) played a role in rural electrification through the Nigeria Electrification Projects (NEP), providing electricity to 6.8 million people under a $350 million World Bank loan and a $200 million African Development Bank loan. The World Bank expressed interest in supporting a successor project with another $750 million grant.

Despite these efforts, the power sector faced financial struggles. Closing the metering gap was identified as a crucial step, with calls for the government to ensure that all customers are provided with electricity meters. Addressing losses, expanding and modernizing networks, and encouraging necessary investments in the sector were highlighted as essential measures to support tariff adjustments and improve overall efficiency in the power sector.