The supply of electricity in a country has a direct effect on economic growth. Research shows that for every 1% increase in electricity supply, a country’s economy has the potential to grow by 3.94%. An average person living in a developed country like Belgium or Canada consumes 10 times more energy than a person living in a developing country like India or Nigeria—a thoroughly sad reality that highlights the crucial nexus between energy security and economic prosperity.
For Nigeria, the largest economy in Africa, the electricity challenges have simply refused to go away. While Nigeria has an installed power generation capacity of about 12,522 MW, it is only able to deliver roughly 4,000 MW to more than 206 million people. The World Bank estimates that 85 million Nigerians lack access to grid electricity, and the Nigerian economy loses more than ₦10.1 trillion yearly because of poor electricity supply. Nigerians spend more than $14 billion yearly on electric generators and Nigeria ranks 171 out of 190 countries with the easiest access to electricity.
Surely, these statistics don’t make any Nigerian proud.
NEPA, PHCN, and the Effects of Privatisation
The current structure of Nigeria’s electricity mix is based on various layers of policy proposals, sweeping legislation, and extensive privatisation projects.
Following the National Electric Power Policy of 2001 and the National Integrated Power Project (NIPP) of 2004, the Electric Power Sector Reform Act (EPSRA) was enacted by the National Assembly in 2005. The Electric Power Sector Reform Act (2005) led to the creation of the Power Holding Company of Nigeria (PHCN) and the unbundling of the infamous “NEPA” (the National Electric Power Authority”). In 2013, the PHCN was finally privatised and unbundled into 11 power distribution companies, 6 power generation companies, and the sole transmission company–the Transmission Commission of Nigeria (TCN).
During the period of privatisation, many Nigerians believed that the problems facing the power sector would finally come to an end once the sale of PHCN assets to private investors was concluded. At the time, Nigeria’s president Goodluck Jonathan said that Nigeria needed to privatise the power sector because Nigeria needed “a revolution” in the power sector. Solomon Louis, a trader, also agreed with the President; “I believe that privatization will solve our problem. This is because infrastructure like power can only thrive in the hands of the private sector. This privatisation will lead to competition among the operators which will in turn lead to efficiency in the system, just like we have in the telecommunications sector now”, he enthusiastically argued. However, more than nine years after the privatization programme, Nigeria’s power sector remains unreliable. The national grid which has remained under the control of the government has now partially or totally collapsed more than 206 times since 2010, and power blackouts across Nigeria have become more rampant than ever.
Need for Decentralisation
The endemic situation in Nigeria’s sector has now led many analysts to advocate for the decentralization of Nigeria’s power sector. By “decentralization”, observers mean that less emphasis should be placed on Nigeria’s national grid and more emphasis should be placed on smaller grids and off-grid power generation. A mini-grid is a power generation system that exists to serve small communities like rural areas, industrial clusters and housing estates with their own independent electricity network distribution system.
In Nigeria, 11,164.5 MW of the 12,522 potential power generating capacity comes from power generating plants all linked to the national grid. The national grid is the network of electrical transmission lines that connects power generation systems to power distribution systems. Nigeria’s national grid is managed by the Transmission Company of Nigeria (TCN) and it is estimated that investment in the grid-connected electricity infrastructure will require over a $100 billion investment over the next 20 years. A lack of investment in this grid-connected energy means more grid failures and blackouts across Nigeria. The national grid collapsed four times in 2021 alone—February, May, July and August.
Since the electricity that comes from Nigeria’s national grid requires a high cost of investment, maintenance and technical know-how, it is only logical that power sector stakeholders in Nigeria begin to pay more attention to alternative means of electricity supply that do not run through the national grid. This mode of electricity generation will include energy sources like mini-grid and renewable energy sources, and will require that state governments be at the forefront.
Greater States’ Participation in Nigeria’s Power Sector
Second Schedule, Part 2, Section 14 of Nigeria’s 1999 Constitution (as amended) which contains the “Concurrent Legislative List” empowers any State House of Assembly in Nigeria to make laws for a state with respect to electricity and the establishment of electric power stations; generation, transmission and distribution of electricity to areas not covered by a national grid system within a state; and the establishment within a state of any authority for the promotion for the management of electric power stations established by the State. This means that states are currently empowered by Nigerian laws to invest in electricity generation and distribution services that are different from those contained under the national grid.
However, while the law clearly stipulates that states can establish electric power systems, there are claims that many states can hardly participate in electric power generation in Nigeria because the Federal Government is frustrating their efforts. Investors in the power sector contend that the federal government is stifling the efforts of state governments in generating and distributing electricity due to an ambiguity in Section 14(b) of Second Schedule, Part 2 of Nigeria’s 1999 Constitution (as amended) which includes a caveat that states can only generate, transmit and distribute electricity to areas “not covered by a national grid system within a state”.
Of course, the main grouse with electricity supply in many states is not there are areas within such states that are not “covered” by a national grid; rather, it is that the electric grid within many areas in many states are weak, ineffectual, and lack the requisite infrastructure to effectively distribute electricity.
Indeed, the electric power situation in Nigeria is more disheartening when one realises that while the Nigerian government and market players stay arguing about the legal interpretation of words written in the constitution, other developing nations are rapidly ramping up electricity supply and bridging their power supply gaps through off-grid power generation and distribution. Bangladesh, for instance, has lifted over 150 million people out of electricity poverty through off-grid energy solutions. Similarly, more than 32 million Africans now have access to electricity through the World Bank’s “Lighting Up Africa” program, many thanks to off-grid products that are powered with batteries at home,
The Rural Electrification Agency (REA), World Bank, and the Rocky Mountain Institute (RIM) estimates that there is a ₦3 trillion market opportunity for mini-grids and solar home systems (SHS) in Nigeria, and successful implementation of off-grid energy solutions can save Nigerian homes and businesses up to ₦1.5 billion yearly. Surely, we cannot let this opportunity pass us by. States must begin to massively invest in off-grid energy solutions for Nigerians and the ambiguous parts of our constitution about states’ participation in the power sector must be amended. This is the only way we can bring 85 million Nigerians out of absolute energy poverty.