This is the second part of the review of the National Integrated Electricity Policy of Nigeria, which is a landmark policy framework for the Nigerian power sector. It is an 84-page, eight-chapter document which addressed diverse issues in the Nigerian power sector, ranging from technical, infrastructural, market design and climate change issues to human resources, gender issues and legal matters. My review last week concentrated on the first three chapters that deal with issues related to grid-generated, or public, power supply, which is where we have the greatest national challenge as far as energy security in Nigeria is concerned.
The big picture as far as electricity policy in Nigeria is concerned should be: how can we eradicate energy poverty and achieve energy security for all Nigerians, or universal electrification, in the shortest possible time? This is what the National Integrated Electricity Policy is expected to be all about. The best way to achieve that is through an optimal, least-cost energy mix of grid, mini-grid, and non-grid, largely solar house systems (SHS) solutions.
Read also: The National Integrated Electricity Policy of Nigeria: A review (part one)
But it is technically possible to achieve universal electrification without producing the quantum of high-quality reliable electricity that can leapfrog Nigeria into a newly industrialised country (NIC) like China and others and make it the factory of West and Central Africa in the shortest possible time. Producing such a quantum of energy is only possible with full privatisation of the power sector and phenomenal investment in and accelerated development of the power sector by private sector investors with the full support of the government, in the true spirit of public-private partnership.
Is such a vision to transform Nigeria into an NIC embedded in the National Integrated Electricity Policy (NIEP)? The answer is “No”. However, the NIEP cannot be faulted in terms of the quantity and quality of its technical content and the breadth and comprehensiveness of its coverage. The two yawning gaps in the policy document, in my view, are: 1) the absence of a transformative strategic intent in terms of the role the power sector can play in achieving the overall economic objective of growing a one trillion dollar economy in the next five years, which is possible with the right economic strategies and policies; or taking Nigeria to the realm of a newly industrialised economy (NIC) in the next decade; and 2) the Tinubu Administration developing an intentional policy framework to completely privatise the power sector for efficient operations and optimal results that can meet the aspirations for energy security in the shortest possible time. The lack of a transformative strategic intent is not primarily the fault of the Ministry of Power; it is the result of a lack of an implementable medium-term National Development Plan (NDP), and the decision to completely privatise the power sector, which is inevitable, falls in the court of the Federal Executive Council, but the overall political will remains that of the President.
“The best way to achieve that is through an optimal, least-cost energy mix of grid, mini-grid, and non-grid, largely solar house systems (SHS) solutions.”
But as of today, it is evident that the political will to completely privatise the power sector is not present. That is evident from several passages of the newly unveiled National Integrated Electricity Policy 2025. The second paragraph of section 1.1.3 of chapter 1 of the policy document states thus, “However, it is now accepted that privatisation of the generation and distribution sub-sectors, the cornerstone of the NEPP 2001 and the EPSRA 2005, has not yielded its intended benefits. Despite significant changes in ownership structure, the expected transformation in the Nigerian electricity sector remains unfulfilled. While it is apparent that the generation sub-sector has seen a certain level of investment, the necessary upgrades and expansions to improve service delivery and reliability in the transmission and distribution sectors have not materialised, leaving many parts of Nigeria with inadequate and unreliable power supply, leading to the increasingly common use of the phrase “unserved and underserved parts of…” Paragraph 1 under section 1.1.6 of chapter 1 also states, “The hallmark of the DisCo sub-sector is highly inefficient operations and poor revenue collection. Much of the existing asset base is obsolete and poorly maintained, leading to frequent load shedding and outages. This is in spite of the huge demand by all customers, particularly commercial and industrial customers, for cost-efficient and reliable service. All these cause the unacceptably high aggregate technical collection and commercial (ATC&C) losses historically prevalent in the sub-sector. Additionally, the sector has faced criticism for poor customer service and inadequate metering, with various efforts at rolling out smart meters that have consistently failed to deliver effective results.”
Read also: Electricity Access: Nigeria’s dream is reality in Cote d’Ivoire
I do not hold brief for the eleven electricity distribution companies (DisCos), but any keen and objective observer since their partial privatisation a little over a decade ago will agree there has been tremendous improvement in the management of the subsector in terms of minimisation of revenue leakages, metering and the use of modern technology in customer service interfaces. The technical and commercial losses (ATC&C) referred to above are part of the legacy challenges inherited by the DisCos. It is general knowledge, for example, that the DisCos have had difficulty over the years metering certain federal government agencies, which owe billions of naira in unpaid bills. The challenges the DisCos and indeed the Nigerian power sector are having are not the result of the ‘failure of privatisation’. They are instead due to the following reasons: 1) the partial privatisation of the DisCos, which are still 40 per cent-owned by the federal and state governments; 2) the huge metering gap that still exists; and 3) the absence of cost-reflective tariffs. These three factors are responsible for the illiquidity of the DisCos and, by extension, the other segments of the power sector.
The resolution of these problems lies in the hands of the federal government. To the government or Ministry of Power’s credit, tremendous effort is underway to bridge the metering gap, and a plan to phase out electricity subsidy and achieve full cost-reflective tariff is also underway. This, however, needs to be complemented by the political wills of the federal and state governments to completely divest their 40 per cent ownership of the DisCos. Once these are done, the DisCos will be awash with liquidity. They will, in addition, be able to raise funds from the money and capital markets, and they will have more than enough funds to upgrade their infrastructure and minimise technical and commercial losses. But the government needs to keep faith with the full privatisation of the entire power sector, which eventually is inevitable.
Mr Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos
