The Nigerian federal government is set to approve the new National Electricity Policy and Strategic Implementation Plan (NEPSIP) in September 2024.
Minister of Power, Adebayo Adelabu, revealed this development at the BusinessDay energy conference in Lagos, themed ‘Powering Nigeria’s Energy Future: Addressing Infrastructural Challenges for Sustainable Energy Development’.
During the event, Adelabu highlighted issues affecting the Nigerian power sector, disclosing that 10 power plants in Nigeria are operating below 10 percent capacity due to significant infrastructural challenges. He said the government is focusing on developing a comprehensive framework to support innovation, research, and development in the electricity sector, aiming to address these inefficiencies and chart a sustainable path forward.
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“The government believes that a supportive policy and regulatory environment are essential for sustainable energy development. We are committed to creating policies that encourage investment, foster innovation, and ensure fair competition in the energy sector,” Adelabu stated.
Despite substantial reforms, including transitioning from a state-owned to a predominantly privately owned unbundled network, the minister said the sector still grapples with aging infrastructure, insufficient investment in renewable energy, outdated power plants, inadequate transmission and distribution networks, and frequent power outages.
Adelabu expressed surprise at the underutilization of facilities, which have the potential to generate significantly more electricity. He identified two key factors limiting power generation: low gas supply and unpaid debts. Gas shortages prevent plants from running at full capacity, while unpaid debts owed to generation companies create liquidity issues.
To address these problems, the federal government plans to enhance current generating assets and invest in new power plants. Recently, the grid’s generation capacity was expanded with the addition of the 700MW Zungeru hydropower plant. Additionally, the government has secured Presidential approval to defray legacy debts to gas companies, ensuring efficient gas supply and addressing Generation Companies’ debts to resolve necessary maintenance and evacuation capacity optimization.
Ambitious Goals and Renewable Energy
Adelabu reiterated the government’s ambitious target to generate about 30,000 megawatts of electricity by 2030, with renewable energy contributing 30 percent to Nigeria’s energy mix. This goal reflects a broader strategy to diversify energy sources and enhance the efficiency and reliability of the power supply.
On the issue of metering, the government has established a framework to inject 1.5 million meters into the power sector through the World Bank Distribution Support Recovery Programme. The Presidential Metering Initiative aims to procure an additional 2 million meters annually for five years, ensuring accurate billing, reducing revenue loss, and improving cash flow for a more liquid power sector.
However, this revelation, though seems promising, has been met with skepticism by a large section of Nigerian electricity consumers.
Skepticism Among Nigerians Regarding Power Sector Reforms
Nigerians’ skepticism about current reforms in the power sector, particularly the privatization efforts, is deeply rooted in the country’s history of failed and underwhelming reforms. Several past government initiatives have promised substantial improvements but have consistently fallen short, leading to widespread distrust and doubt about the efficacy of new reforms.
Privatization and Reforms: From NEPA to PHCN
In 2005 under President Olusegun Obasanjo, the Electric Power Sector Reform Act was passed with the goal of transforming the National Electric Power Authority (NEPA) into the Power Holding Company of Nigeria (PHCN). The reform aimed to eventually privatize the power sector, hoping that private ownership would enhance efficiency and service delivery. Despite this restructuring, the expected improvements in electricity supply and infrastructure development did not materialize.
In 2013, President Goodluck Jonathan’s administration took significant steps towards privatization, transferring 60% of the state electricity company’s ownership to private buyers. This move was based on the 2010 Road Map for Power Sector Reform and involved the creation of 11 Distribution Companies (DISCOs) and six Generation Companies (GENCOs). The privatization was intended to alleviate power shortages by fostering competition and attracting investment.
However, the outcomes have been disappointing. Instead of achieving a stable power supply, the sector has been plagued with issues such as inadequate infrastructure, insufficient investment, and frequent outages.
Many of the power plants and transmission lines are outdated and unable to meet the growing electricity demand. This has led to frequent power outages and an unreliable supply of electricity, which hampers both industrial and domestic activities.
The privatized entities have struggled with operational inefficiencies, including low gas supply and significant unpaid debts. Gas shortages have prevented power plants from operating at full capacity, while financial liquidity issues stemming from unpaid debts have further crippled the sector’s functionality.
The policy and regulatory environment has also been a significant obstacle. Despite reforms aimed at creating a more supportive environment for investment and innovation, bureaucratic red tape and inconsistent policies have stymied progress. This has led to a lack of confidence among investors and stakeholders, further compounding the sector’s problems.
The Current Reforms: More of the Same?
Given this historical backdrop, Nigerians are understandably skeptical about the current government’s promises of reform. The new National Electricity Policy and Strategic Implementation Plan (NEPSIP) aims to address these long-standing issues by enhancing infrastructure, increasing generation capacity, and promoting renewable energy.
However, many Nigerians fear that these initiatives will follow the same path as previous reforms—promising significant improvements but delivering minimal tangible results after gulping billions of naira.