This article seeks to draw attention to the limitations and consequences of a public sector-dominated Nigerian Electricity Supply Industry or power sector. The ownership of the power sector by the government is indeed far-reaching; and surprisingly so for an industry that is generally believed to be private sector driven. This presents great challenges for the predictable growth and speedy development of the sector.
Read also: FG accuses DisCos of frustrating power sector reforms
The transmission assets of the Nigerian power sector are owned by the Federal Government of Nigeria (FGN) 100 percent. The eleven power distribution companies (DisCos), minus Aba DisCo, are 40 percent owned by the three tiers of government – federal, state and local. The three major hydroelectric dams – Kainji, Jebba and Shiroro – and smaller hydro-power dams are all owned 100 percent by the FGN. If we add Kashimbila Dam with an installed capacity of 100 megawatts (mw), the 4 major power dams have a total installed capacity of 2040 mw. The 10 National Integrated Power Plants (NIPP), under the management of the Niger Delta Power Holding Company, with an installed capacity of 4,882 mw, are 100 percent owned by the three tiers of government. There are about 8 major privatised and/or private sector-owned gas-fired power plants: Egbin power plant, Ughelli Power Plant, Afam I-VI power plants, Sapele power plant, Okpai power plant, Azura power plant, Geregu I power plant and Geometric power plant, with a total installed capacity of 6,141 MW. There are 5 other independent power plants (IPPs), 4 of which are traceable to state government or public sector ownership with a total installed capacity of 831 mw. So, on the whole, Nigeria’s total assets of thermal power plants are public sector-owned to the tune of about 46 per cent or roughly 50 percent. When you take the foregoing into account, the Nigerian power sector is over 60 percent or close perhaps to70 percent public sector owned. Adding the activities of public sector regulatory agencies like the Nigerian Electricity Regulatory Commission (NERC), state electricity regulators, the Rural Electrification Agency (REA), the Nigerian Electricity Management Services Agency (NEMSA), the Nigerian Electricity Liability Management Company (NELMCO), the Nigerian Bulk Electricity Trading Company (NBET) and the National Power Training Institute of Nigeria (NAPTIN), it becomes obvious that the Nigerian power sector is heavily public sector owned and managed.
The limitations of a largely public sector owned and managed power sector are many and include; 1). Limited financial resources for both capital investment and short-term cash flow requirements. Government cannot conveniently provide more than 20 percent of the $10 billion the Honourable Minister of Power recently said the power sector requires annually for the next 10 to 20 years; and the N4 trillion naira the FGN owes the power generating companies (Gencos) is a major constraint on their operations and long-term investment plans. 2). Technical and managerial limitations: the power sector is a highly technical industry requiring a great deal of engineering know-how and continuous upgrading of skills, technology transfer/adoption of technological innovations; and equally regular upgrading of managerial know-how – which happen slowly in public sector organisations. 3). Slow response to climate change and decarbonisation imperatives: government officials find the breath-taking pace of change in technology, especially the Internet of Things (IoT) and Artificial Intelligence (AI) combined with the imperatives of climate change and decarbonisation overwhelming, especially as it applies to the power sector, with the unsettling challenges of the global surge in solar energy-driven clean energy dispensation, which is putting Nigeria’s energy transition plan out of gear; and makes Nigeria’s 2060 target for achieving net-zero emission appear like eternity. 4) Uncompetitive and insular mindset due to government ownership. Because of Nigeria’s historical huge petrodollar windfall income from the oil and gas sector, it really didn’t matter much to the managers of our power sector that we were producing just a fraction of our electricity needs, as long as electricity consumers and industries could self-generate power at prohibit costs; and that we have long been left behind by our African peers and that this had serious implications for our competitiveness even by African standards. It really doesn’t seem to matter that our major African peers with just a quarter (South Africa) or half (Egypt) of our population produce ten times more electricity than we do; and that we have settled for the second-best mentality of incrementalism or glacial gradualism in the growth of our power assets and power generation, which makes a double-digit gross domestic product (GDP) growth rate or a $1 trillion economy aspiration seem like a mirage or a mere daydream. 5). Finally are the governance challenges that are implicit when public servants who should be busying themselves with creating a competitive enabling environment for the power sector are neck deep in managing huge projects and enormous financial flows in a governance environment known and celebrated for its opacity and low-level accountability. A major reason why public servants, technocrats and politicians will continue to stonewall against privatisation in the Nigerian power sector is loss of power and patronage. But we must as a nation of diverse stakeholders with keen interest in the power sector find a way around that or else our economy is doomed. But we are not helpless.
Read also: Tinubu meets GenCos in race to pay N4 trn power sector debt
Those entrusted with managing the Nigerian power sector must increasingly be made to make their policy prescriptions and actions subject to public scrutiny and must adopt a principle-based leadership style in a knowledge-driven economy. The greatest hindrance to a turnaround in the Nigerian economy is not constrained oil production, the price of crude in the international market, the naira-dollar exchange rate (which is only a consequence), or the USA-China tariff war. It is an electric power industry that is overwhelmingly dominated by the public sector.
Mr Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos.
