Nigeria Aims Further Legislation at Inefficient Power Sector

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Thursday, June 24, 2021 / 11:57 AM / By CSL Research / Header Image Credit: Depositphotos

 

At the commencement of the fourth republic in 1999, the FGN promulgated the National Electric Power Policy, aimed at entrenching efficiency in the Nigerian power sector by transferring ownership and management of the sector's infrastructure to the private sector. This continued till 2005, when the Electric Power Sector Reform (EPSR) Act was enacted and the Nigerian Electricity Regulatory Commission (NERC) was established as an independent regulatory body for the electricity industry in Nigeria. In addition, the Power Holding Company of Nigeria (PHCN) was formed as a transitional corporation. According to a news report, the National Assembly is working on updating the EPSR act, in order to resolve the concerns that have plagued the privatization exercise from 2014 till date, while also considering the privatization of the Transmission Company of Nigeria.

 

The Nigerian power sector reform is largely seen as a failure. Privatisation of the industry in 2013 brought generation companies and distribution companies into private ownership but has done little - if anything - to increase Nigeria's output from MW4,000. Although the privatisation scheme was done with extreme care, with an elaborate structure and several different agencies to shepherd it through to success, there were always a few sticking points such as the non-cost reflective tariffs. As of May 2021, although Nigeria has 13,000 megawatts of installed electricity-production capacity, only about 4,500 megawatts was being dispatched to the grid daily, in part because of dilapidated transmission infrastructure. Of the 4500 megawatts, even less is being distributed considering the aggregate technical, commercial, and collections Loss.

 

Poor power supply remains a major drawback to economic development in Nigeria. The challenges in the sector run across the entire power value chain of generation, transmission and distribution. Inadequate gas supply to power plants, aged transmission infrastructure, low tariffs, old and obsolete networks; lack of maintenance of network equipment; poor customer data; low meter penetration; and little or no investments due to poor revenues, lack of external funding and huge debts owed to discos by the MDAs are some of the factors impeding power sector reforms.

 

The complex nature of the problems within the power sector means that the sector in its current state can no longer attract investments. In our view, more efforts are required to consolidate on the reforms birthed by the Electric Power Sector Reform (EPSR) Act. We welcome the legislative move to block loose ends in the previous regulation. We agree with the legislators' position that the existing law has served the purpose of reform and is no longer capable of offering the needed solutions to emerging issues in the nation's power sector. However, beyond fixing the laws, decisive steps must be taken to move the sector forward.


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