President Tinubu stated that Nigeria’s power sector privatisation had not met its objectives, as the national grid only serves about 15% of the country’s electricity demand, despite being privatised 10 years ago.
The President made this statement during the Nigeria Electricity Supply Industry market participants and stakeholders roundtable that focused on privatisation on Monday.
He called for the recapitalisation of power distribution companies.
Represented by the Special Adviser, Energy and Infrastructure, Office of the Vice President, Sodiq Wanka, the President explained that over 90 million Nigerians lack access to electricity, and the privatisation of the sector had failed to increase the amount of electricity distributed through the national grid, which has remained relatively flat in the last decade. Despite the Federal Government’s 40,000MW target by 2020, the national grid capacity has only increased from just over 3,000MW to roughly 4,000MW today.
The President stated that the sector’s underperformance in the last decade was due to deep commercial, governance, and operational issues that had plagued the sector, including chronic underinvestment, especially in transmission and distribution. Many of the successor utilities of the PHCN have failed to meet their performance improvement targets due to technical and financial capacity issues.
As of Q2 2023, for every kWh (kilowatt-hour) of electricity sent to the grid, only 60% is paid for, and the tariff paid for that unit of electricity is far from being cost-reflective, especially in light of the recent devaluation of the naira. This has left households and factories relying on expensive self-generation, which supplies 40% of the country’s demand.
The President noted that stakeholders in the sector must intensify efforts to address commercial issues and improve the investment attractiveness of the sector in the short term. He suggested that the sector should have a clear plan to rebase tariffs to allow for adequate investment cost recovery and recognise the actual costs and loss levels of the entire value chain. Furthermore, there must be a clear path to extinguishing historic sector debts to various value chain stakeholders, and a reconciliation exercise is already underway. The President concluded by emphasizing the need to move forward from the current state of the sector and focus on developing a sustainable and efficient power sector.
