NIGERIA POWER SECTOR – AN OVERVIEW

BY FALOSEYI MICHAEL
Media Unit, Nigerian Electricity Regulatory Commission.

The amount of electricity generated is one of the major indicators to determine whether an economy is growing or not. This is why no modern economy toys with its electricity industry since power is the underbelly of wealth creation activities. The low level of economic development in Nigeria can, therefore, be traced to the state of the country’s power sector. Attempts at electricity generation started in Nigeria in 1896. The first private electricity company, NESCO, which is still in existence till date, started operations in 1929. These pioneering efforts were followed with the formation of an electricity distribution company- Electricity Corporation of Nigeria (ECN) in 1951 and the Niger Dam Authority (NDA) in 1962.

At about this time, various works departments, communities and municipalities across the country were making efforts at generating electricity and distributing electricity in their localities. The Federal Government in 1972 considered it appropriate to merge the Niger Dam Authority and the Electricity Corporation of Nigeria to form the defunct National Electric Power Authority otherwise known as NEPA, which was in existence until 2005. The decision to make concerted efforts at electricity generation initially paid off with increasing numbers of cities, towns, villages connected to the national grid, especially in the early 1970s to mid 1980s. As a matter of policy, all local government council headquarters are expected to be connected to the national grid. This is without corresponding policy to expand electricity infrastructure to accommodate new structures in government. Besides, the three tiers of government continued with electrification projects, connecting more of their towns and villages to the national grid without recourse to the system capacity.

The excessive pressure on the system notwithstanding, the Federal Government, which later had the sole authority for electricity generation, transmission and distribution continued to fail to meet its financial obligations. The utility company, NEPA, became a tool to meet social and political objectives of people in government. These resulted in neglect and insufficient investments in day to day running of infrastructure. Throughout the 1990s there was no expansion in power generation facilities despite expansion in population and government institutions and structures. As at 1999 the installed capacity of 5,906 megawatts could hardly deliver 1,750 megawatts of electricity to a population of 120 million people. By the year 2000, and with the advent of democracy, the operating capacity had further declined to 1,500 megawatts or 25.3 per cent of installed capacity. At this rate, total collapse of the system was imminent. Something drastic needed to be done. The Federal Government currently estimate that the power sector would require about N1.5trillion investment over the next few years to ensure that adequate electricity is generated, transmitted and distributed.
It was in the realisation of this that the Federal Government, at the advent of THE democratic dispensation in 1999, started the process of reversing the decay in the power sector with the inauguration of the Electric Power Sector Implementation Committee. That effort brought about the Electric Power Sector Reform Act in 2005. ITS Major objective was to ensure private sector participation. THIS brought about the formation of the Nigerian Electricity Regulatory Commission NERC .IT also led to the transition of the erstwhile NEPA to the Power Holding Company of Nigeria (PHCN) and THE formation of such other structures like the National Electricity Liability Management Company to wind down the government utility. Other developments that have followed the enactment of that Act include the breaking down of the erstwhile NEPA strategic business units into 18 different companies. The Federal Government during this period repaired some of the broken down power station and constructed new ones. These efforts brought about increase in the amount of electricity distribution to over 3,500 megawatts. This is, no doubt, a major improvement. It is, however, a far cry from what is required to provide power for a population of 140 million people.
The formation of NERC has also set the tone for the private sector participation in the market with some of those private initiatives already operational, while some others are waiting in the wings to take off with the removal of certain operational hurdles. Some of the major landmark reforms by the commission included putting in place the Multi Year Tariff Order, – a pricing regime that ensures predictability of what is charged for electricity consumed. This is a sharp departure from unpredictable system that was in place before 2008. The implementation of the Power Sector Reform, which started in 2005, recently received the needed fillip with the launch of the Roadmap for Power Sector Reform by President Goodluck Jonathan. The roadmap articulates the path to be taken TO ENSURE STEADY POWER SUPPLY IN THE COUNTRY. With this renewed efforts BY ALL STAKEHOLDERS it is expected that Nigerians might soon have uninterrupted power supply.

Source: recorded live from FRCN daily commentary