Tuesday, February 27, 2024

Should Nigeria’s Power Sector Undergo Further Liberalization?

Two scenarios this week have put Nigeria’s annoying power supply problem again in the news. The first is the assertion by Akinwunmi Adesina that the abnormal has become normal because no business can survive in Nigeria without a generator. Adesina, who is the current president of the African Development Bank also said that “Nigerians spend $14 billion annually on generators and fuel.” As mind-boggling as these statistics seem, Adesina is in a position to be well-informed about them.


The second scenario is the recent statement by Nigeria’s minister for Power, Abubakar Aliyu, that “the ministry is intensifying performance monitoring of the licensees (electricity generating companies and distribution companies) and the licensing regime, especially their revised Performance Improvement Plans (PIP) to have a better understanding of why some critical stakeholders are performing below expectation.” Now, for the part of the statement that should interest Nigerians right now, “We shall be taking a careful and detailed look at issues of policy, capacity, and the technical requirement, among other things. One very critical concern that we must address in this performance monitoring process is to find out if the terms for granting the licenses were onerous.”


It would be an understatement to say that these measures do not echo the sentiments of many Nigerians. The time to shake things up in the power sector has been long overdue and if this reckoning begins with the service providers (DISCOs), then that’s fine, really. Still, it is early days and it would be wise to hope for any possible changes with cautious optimism. Nigeria’s public servants have not exactly been known to inspire much hope for change with their slew of promises that lack approach and methodology.


Beyond the known technical issues, one problem facing the GENCOs and DISCOs that the minister may be unaware of is that some of these companies, especially the DISCOs, have become monolithic – that is, large, powerful, and slow to change or adapt to the demands of the times we live in. In some cases, some of them can’t help themselves. Perhaps it is the curse of a flawed privatization process that resulted in the emergence of only one or two players overseeing the electricity needs of an entire geopolitical region consisting of 5 or more states. A good example of this is the Enugu Electricity Distribution Company (EEDC) which is responsible for providing (distributing) power to individual homes and businesses in Abia, Anambra, Imo, Enugu, and Ebonyi states.


Surely, if the minister is intentional about assessing the performance of the DISCOs, then it should be easy to discern that the sector needs further liberalization or privatization. In the September 2021 edition of The Avalon Policy Report on Power (Download here), the CEO of New Hampshire Capital, Mr. Odion Omonfoman, rightly opined that one of the quickest ways to see any meaningful change in Nigeria’s power sector would be for the government to “liberalize and further decentralize the power sector to introduce more competition, especially at the distribution segment of the value chain.” You can’t argue with this. The telecommunications sector is proof alone that the more the service providers, the merrier the options are for a contented populace.


As Nigerians cross their fingers and hope that the minister’s words will not grow stale, as power supply to homes and industries continues to deteriorate, it is fitting to ask aloud: how in the holy heavens is a nation of over 200 million people coping with just 4000MW?

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