Nigeria‘s ambitious plans to deliver 40,000 MW electricity capacity from its Power Sector by 2020 have failed; Almost six years into the Buhari-led government, over ₦1.3 trillion has entered into the electricity sector – budgetary provisions and supports; Policy inconsistency, weak regulations, lack of transparency have weakened the country’s electricity value chain; Expert advises government to commercialise the transmission sub-sector if it cannot privatise TCN.
Twenty years after its ambitious target of 40,000 MW electricity capacity, Nigeria’s power sector is bedevilled with several challenges, an obstacle hindering social-economic development.
Chief among them is the crumbling transmission network, marred by distribution losses. This particular challenge has weakened the country’s electricity value chain. It has also hindered the maximum operations of Generation and Distribution companies. And as a corollary consequence, the nation has not met the minimum acceptable international electricity service standards for the last two decades.
But what went wrong for the lofty target of 40,000 MW? For the World Bank, it was the absence of an accountability framework or the lousy governance structure. The Bretton Woods Institution further decried the inadequate transmission network infrastructure of the Transmission Company of Nigeria (TCN), evidenced by the sheer amount of unexecuted projects.
Even President Muhammadu Buhari’s Economic Growth and Recovery Plan to deliver at least 10,000 MW of operational capacity by 2020 fell short. Regardless, the Nigerian government has spent more than ₦1 trillion on the power sector, and to that end, Dataphyte appraised it.
The ambitious dream into the light
Dreaming away darker days led to the government’s privatisation of the electricity industry; a move heralded by the National Electric Power Policy’s promulgation in 2001. The essence of the policy was to ensure an efficient electricity market in Nigeria.
And by 2005, the federal government enacted the Electric Power Sector Reform (EPSR) Act, establishing as a regulator, the Nigerian Electricity Regulatory Commission (NERC). This time, it had unbundled the National Electricity Power Authority (NEPA) into 18 successor companies – forming the Power Holding Company of Nigeria (PHCN). It had 6 generation companies (GENCOs), 11 distribution companies (DISCOs) and one transmission company – the Transmission Company of Nigeria (TCN).
The TCN is managed and run by the government
While privatisation seemed like a smart choice, and it was, challenges still abound in Nigeria’s power sector. And for all the industry advancements, including the introduction of the National Integrated Power Project (NIPP) – gas-powered stations – by former president Olusegun Obasanjo-led government in 2004, the pathway to efficient and reliable electricity is still murky. This challenge, many have attributed to the poor handling of TCN by the federal government.
According to a 2019 White Paper report by PwC, the Transmission Company of Nigeria (TCN) continues to incur losses in its operation due to deteriorating collections from DISCOs. Specifically, the report states that TCN recorded net losses of ₦107 billion (US$685 million) from 2011 to 2014, citing audited financial statements.
Big funds, small impact
Between 2015 and 2020, the federal government allocated the sum of ₦141,660,144,289 (₦141 billion) to the Transmission Company of Nigeria (TCN).
In 2019, the Vice-President Yemi Osinbajo said the President Muhammadu Buhari-led administration had invested ₦900 billion in the power sector since inception.
“Since assuming office, we have invested so far in terms of supporting ₦700 billion in the power sector. Earlier, we invested ₦200 billion,” Mr Osinbajo had said at the palace of Asagba of Asaba.
Apart from budgetary allocations, TCN also received fundings and loans for capital projects from donors and international organisations such as the World Bank. In 2018, the International Development Association (IDA) also approved a $404 million facility to strengthen Nigeria’s transmission network capacity.
Despite these investments, Nigerians still experience epileptic power supply. Last year, the Electricity distribution companies (DisCos) blamed the Transmission Company of Nigeria (TCN) for erratic power supply.
The Association of Nigerian Electricity Distributors (ANED) also alleged that TCN had not recorded an improvement in the energy generated and wheeled since 2015.
In its 2020 second-quarter (Q2) report, ANED said uncertainty over wheeling capacity from TCN continues to hurt performance and improvement plans of DISCOs. Wheeling is the transportation of electric energy (megawatt-hours) through transmission lines.
Low wheeling capacity
Concerning wheeling, TCN’s capacity remains insufficient, despite recent increments from 5,000 in 2016 to 7,124MW in 2017 and 8,100MW in 2018. Presently, the electricity transmission network’s manager in Nigeria aims for a meagre 20,000MW by the end of 2023, a far cry from its 40,000 MW target, two decades ago.
But wheeling capacity does not translate to final transmission due to infrastructure networks and other challenges. Last month, it announced an all-time peak of 5,584.40MW (operational generation capacity) to DISCOs and onward distribution to end-users. According to the Nigerian Electricity Regulatory Commission (NERC), TCN’s operating generation capacity is far below the total installed generation capacity of 12,522MW. “The entire infrastructure is essentially radial, without redundancies thus creating inherent reliability issues,” the regulator said in a post on its official website.
According to the United Nations standard, Nigeria expects to provide one megawatt per one thousand people or 1,000WM for every one million people. But currently, the country cannot meet the electricity demand of more than 40 per cent of its citizens.
How ₦1.3 trillion could have helped Nigeria
Despite efforts and resources over the years, Nigeria only added 3,000 MW wheeling capacity to TCN since 2016. Nevertheless, the operational capacity is below peers in Africa. For instance, Nigeria has less than a third of South Africa’s installed power generation capacity, despite its population size.
Meanwhile, checks by Dataphyte showed that the cost of ₦1.3 trillion within the timeframe could have provided 3,600 megawatts of solar electricity to the national grid at ₦360 million per megawatt. More so, it could have cost the country ₦1.3 trillion to build a hydroelectric plant that will produce 2,100 MW of electricity.
Forging ahead
Mr Shakirudeen Taiwo, an economist with Nigerian Economic Summit Group (NESG), says the government should commercialise the transmission sub-sector if it cannot privatise TCN. He said this would ensure good overall the electricity value chain.
“Electricity is utility, and governments heavily coordinate it. We are saying that they should ensure the market works in line with global best practices rather than ‘Nigerianalise’ the method.”
To overall the electricity value chain, Mr Taiwo urged the government to look into proper regulations, incentivise the private sector for long-term investments, and complete the tariff structure process.
“Government should incentivise the private sector for long term investment in two key segments – transmission and distribution. “They need to eliminate estimated billing and ensure metering of every apartment. “I think what they should do… is to complete the process of tariff structure. You don’t expect someone in Osun state to pay the same tariff with someone in Ikoyi. They need to overhaul the tariff system.”
He further advised the government to adhere to agreement and contract and do away with policy inconsistencies.
To provide a reliable energy sector, Nigeria needs to expand infrastructure and upgrade technology to provide clean and efficient energy. It is also vital to attaining goal 7 of the 2030 Sustainable Development Goals (SDGs).