How governemnt contributed to collapse of Nigeria’s electricity industry, by Amadi
The failure of successive governments to fund capacity expansion in generation, distribution, and transmission networks led to the collapse of the electricity industry, as the national grid could no longer satisfy the growing energy demand.
A former Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi, who made this submission in The Guardian Compendium released recently, added that electricity capacity expansion should have been done before the privatisation of the sector.
According to Amadi, from 1896, when Nigeria developed 25megawatts (MW) of coal power in Ijora, Lagos, till 2000, when the reform started, the Nigerian Government only built four thermal generation plants and four hydro plants able to generate less than 8,000MW.
Amadi said before the reform the bulk of financing for development and maintenance of the national grid came through the national budget.
This, he noted, subjected system planning and long-term development of the sector to the vagaries of public expenditure, adding that oftentime, insufficient provisions were made in the national budget for capacity growth, maintenance and system planning.
“Releases from the national budget are often inadequate and irregular such that it is difficult for the utility operator to comply with scheduled maintenance and system upgrade.
This contributes to increase in losses. Even after the reform, public funding remains critical for the supply of adequate, reliable and affordable electricity.
“In the reform model there are common services, which the state will continue to fund. One of such services is transmission service.
The transmission network will remain publicly owned. This means that it would be partly funded by transmission use of network charges as well as public funding. It is important that such funding be prudent and properly targeted,” he said.
Amadi argued with less than 4,000MW daily supply of electricity, Nigeria has no reasonable chance of fulfilling its potential and ambitions.
He stated: “The Nigerian electricity market is near collapse. The reform has largely failed, and the distribution companies are at the brink of bankruptcy. Policy interventions have failed to create improvement in electricity supply.
“The industry needs billions of dollars to finance needed improvement and capacity growth. Government is struggling to meet its infrastructure challenges, so it is unrealistic to expect that public funding will fill this funding gap. It is now also clear that private funds will not come as quickly and as much as expected.
“The increasing fiscal and political risks in the industry discourage sustainable investment.
“It will take government a long time to drastically reduce these risks. Reducing these risks will require more than technical solution.
It requires adaptive solutions because they are adaptive challenges.
“While government waits for the market to become bankable for private sector investment, it must continue to finance common services.
It needs the discipline of prudent public-sector funding through subjecting its investment in the public enterprises to be fully regulated to ensure prudence and relevance.”