Interview: Chinedu Nebo
How would you rate the effectiveness of efforts to privatise the power sector thus far?
CHINEDU NEBO: We have come a long way in a seamless manner, transitioning from a vertically controlled, government-dominated sector to one that is driven by private companies. This was not an easy task. One of the major challenges that we faced was resistance from the Power Holding Company of Nigeria (PHCN). Labour resisted privatisation from day one. They thought it was not in the best interest of the country and that no developing country hands over all its utilities to the private sector overnight. The picture they were painting was not quite accurate, because no developing country in the world today can single-handedly fund a power sector revolution that fosters inclusive access. Governments need to liberalise and allow private firms, motivated by profit, to enter the market and seed a substantial amount of investment in providing greater power access. It is just like it was with telecoms companies. Nigeria had less than 150,000 telephone lines, and they were very expensive. Then the government decided to liberalise and today we have 120m lines, with more coming. We see power taking the same track.
What policy initiatives might help increase the flow of private capital into the power sector?
NEBO: We looked at the entire investment chain and found out that the most significant point of failure was the unavailability of gas and a situation where gas suppliers were not incentivised to grow. Oil firms, until recently, have not even wanted to extract gas. Nigeria is sitting on the seventh-largest gas deposits in the world and yet we do not have gas for power generation. A major step was taken in 2014, implementing a comfortable pricing mechanism set at $2.50 per 1000 sq cu ft, which will spur investor appetite. This was a major policy move.
On the other hand, the issue is transmission. We need to make sure we have enough capacity to get investors to do independent power projects. However if you do not have the capacity to transmit electricity, investors will not take an interest. We already have the power purchasing agreements that have been issued by Nigerian Bulk Electricity Trading to make the process more attractive, and we are inundated with expressions of interest from investors who want to go directly into transmission. They know Nigeria needs to increase power production.
One way to ensure power gets to the people is through a transmission network that is sustainable and adequate. These are the veins and arteries of the electricity industry. We are only now in the beginning stages of privatisation in this segment through the Transmission Company of Nigeria (TCN). We are moving slowly and carefully and are looking at many countries that have gone through similar processes. We have done well, in terms of reducing losses on the transmission end. The TCN has significantly reduced losses, from around 13% to less than 8%, which is remarkable for a system that is so new and is of such critical importance for the country.
What are the challenges to integrating regional grids into a coordinated national structure?
NEBO: Integration has not been easy, because power generation was neglected for so long, particularly during the periods of military rule. Investment in the sector has never grown in tandem with population expansion and urbanisation. Virtually every transformer at any level within the entire network was overloaded once urbanisation took place.
In that context, you simply cannot manage a national grid. Only under the Jonathan administration has there been a blueprint for the segment that attempts to close the loops, build capacity and include renewables in the mix, but it is still at the under-330 KV level. What we need for the industrial revolution we seek is to provide 765 KV, and this is where we expect private investors will play a role.
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