Ovie Ukiri, Managing Partner, Ajumogobia and Okeke, on the development of privatisation in the power sector: Viewpoint

Ovie Ukiri, Managing Partner, Ajumogobia and Okeke

The Nigerian power sector has undergone several significant changes in the past decade. In 2010 the Nigerian president at the time presented a roadmap for the sector. In developing the roadmap, the country’s federal government built on the foundation laid down in 2001-02 through the adoption of the National Electric Power Policy, and with the promulgation of the Electric Power Sector Reform Act (EPSRA) in 2005. The roadmap culminated in the privatisation of the sector to correct inherent failures and inefficiencies.

The sector is currently comprised of three major subsectors: power generation, which consists of successor generation companies; independent power producers and national integrated power projects; power transmission, which is essentially the Transmission Company of Nigeria; and the power distribution companies. In 2013, pursuant to the privatisation initiative, the state-run Power Holding Company of Nigeria was unbundled into 18 successor companies; to wit, six generation companies, 11 distribution companies and one transmission company. However, the successor companies continue to face myriad challenges, such as insufficient gas supply, transmission infrastructure challenges and aggregate technical, commercial and collection issues.

The core legislation applicable to the sector includes the EPSRA, which established the Nigerian Electricity Regulatory Commission (NERC) and provides the legal framework for all reform activities. Some of the key regulatory agencies operating within the sector include NERC, which is an independent regulatory body with the authority to regulate the power industry in Nigeria; the Federal Ministry of Power, whose responsibilities include initiating and formulating broad policies and programmes for the development of the sector; the Energy Commission of Nigeria, which is charged with conducting surveillance and coordinating the systematic development of the various energy resources of Nigeria; and the Rural Electrification Agency, which was established by EPSRA to promote rural electrification.

It is notable that, since 2005, there have been some achievements made in the sector, with NERC licensing more than 20,000 MW of power that could potentially come to the grid in a few years. However, the licensees are yet to make real progress in executing their projects. Problems faced by the sector include low tariffs, which have only recently been reviewed; low supply of gas to power plants due to vandalisation among other reasons; tariff collection difficulties; and obsolete power distribution equipment. The federal government has pledged to increase power generation and distribution from its present status of 1500 to a historic 10,000 MW of electricity by 2019.

In order to help realise this pledge, the government is currently developing and updating the transmission network. The minster of power has stated that the ministry is concentrating on around 142 projects, – of which 45 are about 50% complete – to boost the transmission network. The federal government is also fast-tracking the completion of pipelines from gas points to power stations and is providing more security to protect the pipelines. It is also encouraging power companies to replace out-dated equipment and improve the quality of services.

NERC is exploring other alternative sources of power generation and has granted a company a licence to build a 1200-MW, coal-fired power plant in Nigeria. This is a step in the right direction because coal is the most widely used primary source of fuel, accounting for over 30% of the world’s total power production. As Nigeria has an appreciable stock of unutilised high-quality coal, using it as a supplement for power generation will help to limit the current reliance on gas. The decisive steps that have been taken so far to resolve the current issues will, if implemented properly, revamp the power sector and have a positive impact on the Nigerian economy.

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The Report: Nigeria 2016

Legal Framework chapter from The Report: Nigeria 2016

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