Power Supply Fails To Improve 10 Years After Privatization

THE year 2023 marked the tenth-year anniversary of the partial privatization of the power sector in which the Federal Government handed over to the private sector its 60 per cent stakes in 11 electricity distribution companies, sold or concessioned seven power generation plants and retained full ownership of the transmission company.



While electricity supply has remained epileptic and consumer experience largely frustrating, the government which sought to divest from the sector has ended up spending over N7 trillion trying to shore up the fortune of the Nigerian Electricity Supply Industry, NESI.



Besides being largely in private hands, the power sector landscape was significantly altered in 2023 with the signing into law of the Electoral Act. The Act came after the power sector was moved out of the exclusive legislative list of the 1999 Constitution into the concurrent list.


The Act opened up the sector in that it allows state governments to not only have the capacity to issue licenses but to also generate, transmit and distribute electricity within the states.


The year also saw the appointment of Adebayo Adelabu as the new Minister of Power. Without the appointment of a Minister of State, Adelabu became the first man to administer the sector single-handedly since the advent of the present democracy in 1999.

Generation: Huge capacity remains unutilized


Power generation during the year remained abysmally low despite the 13,000MW installed capacity presented by the country’s 27 power generating plants. Poor utilization has however taken its toll on the plants as most have gone into a state of disrepair.


The Nigerian Electricity Regulatory Commission, NERC, in its third quarter report released in December, stated: “In 2023/Q3, the overall plant availability factor of all grid-connected plants was 33.31 per cent; this means more than 2/3rd of the installed capacity in the NESI was not available. Only seven plants had an availability factor of 50%. Azura IPP plant had the highest availability factor of 90.04% while Alaoji NIPP had the lowest availability factor of 0.20%.


“The overall low PAF (plant availability factor) of the GenCos in the NESI is a major source of concern to the Commission. The largest driver of plant unavailability was mechanical outages – this is a major problem that has plagued the NESI arising from the age of many of the plants (the average plant in the NESI is 21 years old) as well as challenges with the maintenance of the units”.


The grid and attacks on transmission towers

The national grid managed by the Transmission Company of Nigeria, TCN, collapsed thrice during the year after managing to remain stable for about 400 days. Seen as one of the weakest links in the power sector value chain, the Federal Government has expressed its desire to unbundle TCN into two different entities, Independent System Operator and Transmission Service Provider.


However, despite the efforts by the government to procure new mega transformers (several of which were delivered during the year) to upgrade substations across the country, a series of incidents including fire outbreaks at substations and attacks on power towers continued to limit transmission capacity.
In December alone, five power towers were lost in the North-East after suspected vandals attacked the transmission lines with explosives. According to TCN, attacks along the Maiduguri – Damaturu Transmission Line left a security officer dead.

Poor performance by DisCos, lack of meters hinder progress
During the year, electricity distribution companies continued to perform poorly after failing to invest in their networks and other infrastructures. DisCos continued to pick loads in order not to incur costs from the Nigeria Bulk Electricity Trading Company, NBET.


In terms of metering, data from the Nigerian Electricity Regulatory Commission, NERC, showed that as of 30th September 2023, there were 12,825,005 registered electricity customers in the Nigerian Electricity Supply Industry, NESI, out of which only 5,707,838 (44.51 percent) are metered.

The data showed that Ikeja Electric (72%), Abuja DisCo (60.21%) and Eko DisCo (58.6%) had the rate of customers with meters, while Yola DisCo (18.7%), Kaduna Electric (23.7%) and Kano DisCo (24.8%) had the least rate of customers with meters.


The Federal Government during the year took concrete steps to bridge the metering gap by opening bids from 47 companies for the supply of 1.25 million electricity smart meters funded by the World Bank’s $155 million loan.


The bid opening was part of the government’s National Mass Metering Programme started in 2021 with the supply of one million meters in “phase -0”. The phase-1 of the project however failed to kick off as the N200 billion funds expected from the Central Bank of Nigeria, CBN, failed to materialise.


This prompted the World Bank intervention of a $500 million loan for phase-2 with the balance $345 million going directly to the electricity distribution companies, DisCos, to fund the expansion of the distribution networks across the country.

Renewable and rural electrification

The Rural Electrification Agency, REA, disclosed that it has signed 342 grant agreements with local firms to provide off-grid electricity for unserved and underserved Nigerians under the Nigeria Electrification Projects, NEP.


The NEP programme, which was funded by a $350 million World Bank loan and $200 million loan from the African Development Bank, AfDB has so far provided electricity for 6.8 million people, the agency has disclosed. It came to an end in August 2023.


In its place, the World Bank disclosed that it was considering supporting the Nigeria Electrification Project, NEP, with another $750 million grant.


World Bank Director of Strategy and Operations, Western/Central African Region, Ms Elizabeth Huybens said “The first Nigeria electrification project that we see at work here, which I believe was $350 million, is coming to a close and so we are preparing a successor project that will be $750 million. So we are expanding our support to something that we think is critical and on which, by the way, Nigeria is leading the world with this sort of small grid development”.

Power sector’s financial struggles fail to abate
With President Bola Tinubu who was sworn in May 2023 freezing a new tariff regime which was expected to have started on July 1, 2023, the market revenue shortfall increased to about N600 billion to further compound the liquidity challenge facing the sector. NERC said a review of the Multi-Year Tariff Order, MYTO, in July would have raised the average tariff from N68/kWh to N110/kWh.


NERC quarterly reports showed that in the first nine months of 2023, the DisCos collected N782.56 billion or 73.58 percent of the N1.063 trillion billed to customers, leaving N280.98 billion uncollected.

2024 outlook: FG targets distribution network expansion


With over 13,000 Megawatts of installed power generation capacity and 7,100MW transmission capacity, the Minister of Power, Chief Adebayo Adelabu has said priorities would now shift to improving the distribution segment of the Nigerian Electricity Supply Industry, NESI, as part of the effort to boost power supply to homes and businesses.


He said the government would work hard to bridge the seven million metering gap in the industry to boost liquidity, explaining that after many years of failing to improve power supply, it was for the government to change tact and put in place policies that specifically target the distribution segment.
He stated that the policy change would include a complete review of the structure of the electricity distribution companies with the size of the franchise area, capitalization and tenure of licenses in focus.
In the New Year also, the 700MW Zungeru Hydro in Niger State is expected to commence operations, further boosting the national grid supply.


The tariff adjustment that has been frozen in the past six months is expected to take effect early in 2024, as it was difficult to identify where the government would get the N1.6 trillion subsidies needed to keep it frozen.



Speaking to Vanguard, the President, Nigerian Economic Society, NES, Professor Adeola Adenikinju said the government must lead the charge to close the metering gap in the sector, pointing out that all customers needed to be provided with electricity meters.


“In terms of electricity, I think the government has to see how we can reduce the losses in the sector so that we don’t pass the losses to consumers. The issue will be how to ensure that more Nigerians have access to meters so that they can pay the actual cost of energy they consume. Then how do ensure that electricity distribution companies, DisCos, make the necessary investment to expand and modernize the network. Once we do that then, I will support that the tariff should go up.


“The reality is that in the rural areas where people use decentralised electricity that is provided through solar, they are paying above N100kWh. So if the villagers are paying then why shouldn’t those in the urban areas pay the market price? If we don’t pay the market price, it will affect supply and then we will all go back to using generators which are more expensive than grid electricity”, he added.