Power sector privatisation a curse or blessing?

TOPE SUNDAY in this piece asks whether the privatisation of Nigeria’s power sector in the last 10 years is a curse or blessing.

Concerns

The issue of power has been a long-standing problem for Nigeria, with a history of inadequate electricity supply affecting the country’s economic growth and development. In 2010, the federal government made the crucial decision to privatise its electricity sector, handing over ownership and operation of assets to private companies.

However, recently, at the Nigerian Electricity Supply Industry (NESI) Market Participants and Stakeholders Roundtable (NMPSR) in Abuja, President Bola Ahmed Tinubu, who was represented by his Special Adviser on Power and Infrastructure, Malam Sadiq Wanka, said 10 years after the sector was privatised its objectives were yet to be met, saying that over 90 million Nigerians still lack access to electricity.

The president, however, called for intensified effort to address commercial issues and improve the investment attractiveness of the sector, saying the 10th anniversary of the privatisation of the power sector was the perfect opportunity to reflect as a sector and as a government on the progress achieved and the challenges faced since the unbundling and privatisation of the integrated national utility.

Also, last week in Abuja, journalists covering the power sector, under the auspices of the Power Correspondents Association of Nigeria (PCAN), asked the federal government to holistically review the sector 10 years after its privatisation.

The chairman of PICAN, Comrade Obas Esiedesa, who made the call in his open address at the 3rd annual workshop of the association, clarified that the review should not necessarily take away the assets from operators, but to find solutions to the huge challenges facing the industry.

The challenges

10 years later, the privatisation of the power sector, which was aimed at improving the competitive electricity market and efficiency, is faced with a lack of investment. Accordingly, one of the reasons for the sector’s privatisation was the expectation that private investors would bring in more funds than the government could to the sector. However, ten years after, this expectation remains unfulfilled. Private investors have not invested enough capital into the sector, leading to sluggish infrastructure development.

Also, the privatisation process led to the creation of regulatory organisations such as the Nigerian Electricity Regulatory Commission (NERC). However, the regulatory agencies have been unable to exercise adequate oversight over the privatised companies. The reported under-regulated behaviour of the DisCos has led to increased tariffs, inadequate power supply, and other related problems, leading to significant power outages across the country.

Blueprint Weekend can reliably report that the introduction of the cost-reflective tariff structure has created confusion among consumers, leading to an increase in tariffs that have made it difficult for low-income earners to afford power.

The gains

Despite the numerous challenges facing the sector, its privatisation has led to the improvement in infrastructure development, including the installation of smart meters, sub-stations, transformers, and other technological solutions. The technological advancements, this medium gathered, have positively impacted on the power sector’s performance, leading to increased power generation, reduced downtime, and improved power distribution.

It further learnt that it has led to the creation of employment opportunities in the power sector and contributed to skills development among the workforce.

Although the expected investment levels have not been attained, privatisation has opened new opportunities for private players to invest in the sector. It has also provided access to private capital to facilitate and foster rapid progress in the power sector, making more funding regimes available to energise the electricity sector.

Citizens’ views

Speaking about the power sector privatisation, the president of Nigeria Consumer Protection Network, Kunle Olubiyo, raised some posers and submitted that the contract was fraudulent and called for its mid-term review.

Olubiyo, who is also the coordinator of Power Sector Perspectives, said, “The truth of the matter is that the original intention of the privatisation of the power sector was targeted at improving the competitive electricity market and efficiency. But when it comes to market competition, the threshold or the benchmark has failed. When it comes to market monopoly, we’ve moved from a public sector-driven monopoly to a private sector-driven monopoly.”

He said further, “After apart from 15 years, they are now giving them another 10 years. That is 25 years for a non-performing sector. So, the issue we’re looking at is that the federal government is all about people. It is the government of the people and for the people. We are thankful to the present leadership of the ministry of power— the minister, and the SA to the president on power, and the Mr. President that they have listening ears that we want to come back to the table because the arrangement was that the mid-term review from 2013 to 2018 was supposed to take place.
“So, as we speak now you cannot give us what you don’t have. A lot of downtimes have taken over the power sector, and it is not going to give us the deliverables that the Renewed Hope Agenda of Mr. President is going to achieve. So, we’re saying why should the operators or players be afraid of sitting down with the media, and the stakeholders to discuss the issue?”

Not a curse, but…

Speaking with Blueprint Weekend, a legal practitioner and power sector policy analyst, Mr. Bode Fadipe, said the privatisation is not a curse but admitted that there are some challenges associated with its privatisation and wondered why it is still not being run as a private entity.

He said: “I hold the view that the privatisation of the power sector is not a curse, rather, I would say is a blessing but we have not fully realised the benefits associated with that decision. There are so many areas where we took steps that could have been taken differently. So, for me, privatisation is not a course, but rather there are challenges, and I will tell you one or two of them.

‘Yes, we have allowed private investors to be involved in the power sector, but we have not allowed it to be run under the rules of the private sector, which is profit-driven. Which is its must fund itself. Unless we come from that perspective, we will continue to have this challenge. There is a conversation around the fact that power should be a matter of accessibility, that people should have access to it and then they can determine whether they want to go for it or not.

“It’s just like public universities and private universities, public secondary schools and private secondary schools. They are all available; those who can go for them, who can afford them, go for them because they can afford them. This is the same thing with the power sector. People are beginning to say, okay, look, rather than tariff, let people go based on budgets. It will come down to tariffs, eventually.
“Unless we deal with that issue, we’re likely to continue to have that challenge.

And that’s why investors are saying that as long as the government continues to regulate the price, you have not given that ownership to the private sector.”

Politicisation

On his part, the convener of Powerup Nigeria, Adetayo Adegbemle, who neither sees the privatisation of the sector as a curse nor blessing, lamented that politics has crept into the sector.

“We can not say that privatisation is a blessing or course. It is just a policy direction meant to correct years of non-investment, years of rot, and corruption in the power sector in the old monolithic NEPA structure.

“It was an idea that was supposed to resolve a problem that we had. Now, we also note that privatisation is just a form or a part of the Power Sector Reform that we started in 2001 by President Olusegun Obasanjo-led government. 10 years later, there have been lessons learnt, and there have been mistakes made. The hope we have is that we have been able to evolve the lessons that have yielded results.

“Unfortunately, now we are allowing politics to take over the colouration and the direction in which we are going. I would say we have a lot of good policies, and one of them is the Power Sector Recovery Programme, which was also supposed to be a continuation of the privatisation and the power sector reform.”

Way forward

On the way forward, Adegbemle said, “We have also been asking for the focus on the local content and local manufacturing capacity. For instance, metering, and I don’t think there is anywhere in the world where they depend so much on external factors to solve such massive problems that the nation has. I would say that we need to focus on local meter manufacturing, local engineering, and local solutions to the power sector problem.
“We also need people who have ideas. We don’t want people who are politically appointed because we just want to patronise them. We have people who have ideas and have contributed to the sector. That is just the basis of things to do to move forward”.

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