Nigeria@60: Power sector as the key to national prosperity
By Solomon Asowata
As Nigeria marks its 60th Independence Anniversary on Oct. 1, it is imperative to appraise the contribution of the power sector to the socio-economic development of the country and actualising the dreams of its founding fathers.
Some energy experts and stakeholders are of the opinion that until Nigeria gets its power sector right, the potentials of the most populous black nation on earth may never be realised because of the critical role of the sector in industrialisation and national prosperity.
They believe that historically, the power sector has not contributed to the Gross Domestic Product (GDP) as much as the country would expect, noting that with the right policies and programmes, this challenge can be overturned.
According to a report published by the Centre for Health, Equity and Justice (CEHEJ) titled: “Kept in Darkness – Holding Non-Performing Electricity Contractors Accountable” in August 2019 at 126KW per capita, Nigeria lags far behind other developing nations in terms of grid-based electricity consumption.
“For example, Ghana’s per capita consumption (361KW) is 2.9 times higher than that of Nigeria while South Africa’s (3,926KW) is 31 times higher.
“At 45 per cent, Nigeria’s electrification rate is lower than that of Ghana (72 per cent) and South Africa (85 per cent).
“Furthermore, unreliable power supply forces both households and industry to rely on privately owned generators for much of their power.
“These generators are more than twice as expensive (N62.94/KW) than grid-based power (end-user tariff of N26.38/KW), the report said.
“It says electricity production in Nigeria dates to 1896 when electricity was first produced in Lagos and the first generating plant was installed in Marina, Lagos in 1898. That was 15 years after its introduction in England,’’ CEHEJ stated in the report.
It says the total capacity of the generators used then was 60KW. In 1914, after the amalgamation of the Northern and Southern protectorates to form a modern Nigeria, some states in the country began to develop an electric power supply system.
It says electricity administration began in Nigeria in 1946 under the Public Works Department (PWD), which was established to take over the responsibility of electricity supply in Lagos State.
“By 1950, a central body was established by the Legislative Council which transferred electricity supply and development to the Electricity Corporation of Nigeria (ECN).
“However, other bodies like Native Authorities and the Nigeria Electricity Supply Company (NESCO) also had licenses to generate electricity in some other locations in Nigeria.
“There was another body known as the Niger Dams Authority (NDA), which was established by an Act of Parliaments.
“The Authority was responsible for the construction and maintenance of dams and other works on the River Niger and elsewhere, generating electricity by means of hydropower, improving navigation and promoting fish brines and irrigation among others.
“The electricity produced by NDA was sold to ECN for distribution and sales to end-users at utility voltages,’’ the report says.
It notes that there was a major restructure in the sector in 1972, which birthed the National Electric Power Authority (NEPA through Decree No. 4 by the then military government.
Mr Osayu Ogboghodo, a consultant with Nextier Power, says the NEPA era never really lived up to the hype.
“The NEPA era was synonymous with a government monopoly, high transmission and distribution losses, low electricity supply, low revenues, high losses, power theft, under-investments, meagre infrastructures and an overall poor organisational structure.
“As such, the power sector failed to drive economic growth during this era.
“Here’s some context on the problems that troubled the era. Out of the 79 power generation plants, only 19 were operational. On average, about 28 per cent of the installed capacity (6,200 MW) was generated daily.
“An estimated 90 million people were without access to electricity during this period. Between 1991 and 1999, there were barely any investments in generation and transmission infrastructure.
“This is why the reform was proposed in 1999, eventually resulting in the power sector we recognise today, the energy expert says.
“Thus, in the quest to find a lasting solution to the woes in the sector, NEPA was unbundled to Power Holding Company of Nigeria (PHCN), which was later privatised in 2013.
This brought new players into the industry such as the 11 electricity Distribution Companies (DisCos), six electricity Generation Companies (Gencos), Transmission Company of Nigeria (TCN), Nigerian Bulk Electricity Trading (NBET) and the Nigerian Electricity Regulatory Commission, as the industry’s regulator.
These reforms were backed by a legislative framework, Electric Sector Power Reform Act (ESPRA) 2005 and were meant to stabilise the Nigerian Electricity Supply Industry (NESI) which is the umbrella body of all the electricity players.
However, Ogboghodo believes that this current situation still falls far below expectations with power generation still hovering just above 5,000 MW despite the 13,000MW installed capacity.
“The utility companies (both government and private owned) have lacked the technical and financial capabilities required to transform the power sector.
“Similarly, the government was unable to deliver on its promises of cost-reflective tariffs and other policy and regulatory requirements. As a result, the power sector has been unable to provide an incremental, stable and uninterrupted power supply for many years.
“The sector has also lacked coordination and communication among the market operators,’’ the consultant says.
Mr Adeola Samuel-Ilori, National Coordinator, All Nigerian Electricity Consumer Protection Forum, shares a similar view.
He says: “The expected hope remain eluded since privatisation due to the role played by NERC, the agency in charge of monitoring and implementation of the sector policies.
“By and large, over time, there has been no gain of privatisation experienced by consumers so far due to policy summersault as witnessed from NERC in its capacity as an unbiased umpire, hence making it look like it was a mistake privatising the sector.
“This action and inaction have led to calls for cancellation of the process, or at most, review since no benefit so far is being received from the exercise’’.
Worried by the failure of the sector under successive governments, President Muhammadu Buhari’s administration set up the Presidential Power initiative to address the challenges.
The government entered into a deal with German electricity giant, Siemens Group in February 2020, which will not only enhance the distribution network but will also increase generation capacity to the tune of 40,000MW.
The President also ordered mass metering of electricity consumers to put an end to estimated billing by granting a one-year import waiver on pre-paid meters under the Meter Assets Providers (MAP) Scheme.
The government, through the Nigerian National Petroleum Corporation (NNPC), the Department of Petroleum Resources (DPR) and the Nigerian Gas Company, has intensified efforts to boost supply and utilisation of gas for electricity purposes.
Also, NERC on Sept. 1, approved the Service Reflective Tariff for the 11 DisCos which led to increment in electricity tariffs for customers enjoying 12 hour supply and above daily.
Mr Godwin Idemudia, General Manager, Corporate Communications, Eko Electricity Distribution Company (EKEDC) maintains that the move will help reposition the NESI within a very short period and Nigerians will begin to reap the benefits.
“The new tariff is to ensure that prices charged by EKEDC are fair to customers and allow for the full recovery of the efficient cost of operations and a reasonable rate of return on capital invested.
“It will provide a path for transitioning to full service-based cost-reflective tariffs by July 2021 and to reclassify and disaggregate customers on the basis of agreed commitments on quality of service to customers,’’ Idemudia said.
Similarly, Mr Felix Ofulue, Head, Corporate Communications, Ikeja Electric, says the DisCo will invest N148 billion in two and a half years to upgrade infrastructure across its network to achieve improved service delivery.
Ofulue says the total investment, which will be in phases, will cut across infrastructure upgrade to support NMD metering, energy growth, network stability and efficiency.
However, Samuel-Ilori says the increment in tariff will not solve the issue until NERC is able to fully discharge its responsibilities as the regulator of the industry.
He says new and competent private investors coming into the sector and government’s investment on renewable energy to create an affordable alternative for Nigerians is the way to go.
In developed countries, where an industrial revolution is being witnessed, the first two things they fixed are infrastructure and power to make sure the industries cost of production and overhead are reduced and produce more as to meet the balance of payment through export.
He says: “In fixing power, small and medium enterprises will grow at a very enviable leap. This will increase the GDP, reduce unemployment indices and increase the people’s purchasing power.
“Once we can produce what we are importing locally and with market saturation, start exporting and our naira will grow and eventually become economically independent. By so doing we will be known as the real giant and be together not this imaginary giant by size but low in productivity.”
On his part, Ogboghodo says political will and support can drive the right policies and regulations.
“In turn, the right policies and regulations can attract investment opportunities and improve energy access to households, individuals, industries and businesses alike, he adds. (NANFeatures)
