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Urging FG To Review The Privatization Agreements With Nigeria’s 11 DisCos

Feature Article Urging FG To Review The Privatization Agreements With Nigerias 11 DisCos
SUN, 21 APR 2024 LISTEN

There is no denying the fact that the privatization of the National Electric Power Authority (NEPA) in Nigeria, which was later transformed into the Power Holding Company of Nigeria (PHCN), was necessitated by several factors, key among them is unsatisfactory performance.

It is not an exaggeration to recall that NEPA struggled with generating enough power to meet the country’s demands, leading to frequent blackouts and unreliable electricity supply, and close to the foregoing factor was that there was persistent poor transmission and distribution. This is as infrastructure for transmitting and distributing electricity was outdated and inefficient, causing further disruptions in power supply. In a similar vein, there was inefficient capacity utilization. To buttress this view, NEPA’s operations were not efficient, leading to a waste of resources and an inability to provide consistent service.

In fact, there was tenacious infrastructure deficit as there was a significant lack of investment in the necessary infrastructure to support a modern and reliable electric power grid.

Worsening the challenge was that the collective economic well-being of virtually all Nigerians by each passing day was badly affected. Without any iota of exaggeration, the poor performance of NEPA was negatively impacting the economic well-being of the country, as reliable electricity was essential for economic growth.

Given the foregoing backdrop, it was incumbent on the government at the time under review to privatize NEPA as a policy tool. The reason for the privatization at the time was pressing as the retrogressive situation was seen as a way to reduce the public sector’s role in the economy and to promote more efficient allocation of resources through market forces.

In fact, the expectation was that privatization would lead to improved efficiency, better management, and increased investment in the power sector, which would ultimately benefit the economy and the well-being of the Nigerian people. However, given the level of black outs which Nigerians and their businesses were been thrown into (and still been thrown into), particularly since President Bola Ahmed Tinubu became Nigerian president, it will not be a misnomer to opine that the once hailed privatization exercise has defeated its noble objective as the expected benefits have not been fully realized, particularly as the challenges of providing optimal, affordable, and reliable access to electricity still exist to the detriment of the people and the unarguable beleaguered economy.

Without any scintilla of hyperbole in this context, the privatization of NEPA in Nigeria, given recent experiences, has become an exercise in futility. To aptly put it, the purpose of the privatization exercise has been defeated. To put it bluntly, the privatization of NEPA in Nigeria has become an exercise in futility for several reasons.

The reason for the foregoing view cannot be farfetched as it can be said that despite the unbundling of NEPA and the sale of power firms that Nigeria still faces a reliable power supply issue. With an installed capacity of 12,522 MW, the country generates only around 4,000 MW, which is insufficient for its population.

Without a doubt, the privatization was supposed to make the energy sector more efficient and attract investment. However, it has resulted in price hikes coupled with miscellaneous tariffs, and estimated billing, which have been burdensome for consumers.

To exacerbate the matter, the privatization exercise is unarguably an incomplete process. The reason for the foraging line of thinking cannot be argued against given the fact that due process in the exercise has remained vague leading to a lack of clarity and continuity in the sector’s management.

In fact, at the moment, the sector has continued to suffer from weak infrastructure, poor metering, and inadequate market governance, which were problems that existed before privatization, and have paradoxically persisted and worsened, even as the process is unarguably suffering from infrastructure and management issues.

Not only that, it is crystal clear that the implementation was flawed as it is inherent with inaccurate data collection to understanding the integrity and competency of the investors that purchased the 11 Distribution Companies.

Argued from the perspective of the foregoing, it is germane to allege that the owners of the 11 DisCos in Nigeria are close to the government, and this can be justified by the fact that the Nigerian government holds a significant stake in these companies. Recently, the Federal Government transferred its 40% shareholding in the DisCos from the Bureau of Public Enterprises (BPE) to the Ministry of Finance Incorporated (MOFI). This move indicates a direct involvement of the government in the ownership and management of the DisCos.

Furthermore, the government’s decision to transfer these shares to MOFI, which is the investment vehicle of the Nigerian government domiciled with the Federal Ministry of Finance, suggests a consolidation of control and a closer relationship between the DisCos and the government. The involvement of high-level government officials and directives for the DisCos to implement decisions made by MOFI also point to a close connection.

In fact, this relationship is significant because it implies that the government has substantial influence over the operations and decisions of the DisCos, which are responsible for the distribution of electricity across Nigeria. Such a relationship can have implications for policy-making, regulation, and the overall performance of the electricity sector in the country.

Given the foregoing, there has been subdued public discontent. In fact, there have been several protests against the privatization, and even suggestions from the National Assembly that the government should take back control or re-privatize the power firms, indicating widespread dissatisfaction with the outcomes.

In light of these issues, it is clear that the privatization of NEPA has not delivered the expected improvements in Nigeria’s power sector. Instead, it has left a legacy of unresolved challenges that continue to hinder the country’s economic growth and development.

Drawing inspiration from the fountain of public discontent, it is expedient to advocate in this context that the privatization of NEPA has to be reviewed.

The reason for this contextual call cannot be faulted as the privatization has been a subject of debate and calls for review.

If there is any reason to advocate for its review, it is that of the collective lackadaisical and unsatisfactory performance of the 11 DisCos allegedly sold to businessmen that are close to those in government, despite the fact that the expectation of the people from privatization was to improve efficiency, reduce losses, and ensure reliable electricity supply. However, there have been persistent complaints about the performance of the 11 DisCos, including issues with electricity distribution, billing, and customer service.

Another reason is that there have been the nagging issue arising from financial challenges which the DisCos have been confronted with. Without a doubt, the DisCos have been facing financial difficulties, which have impacted their collective ability to invest in infrastructure and maintenance. This has led to questions about their financial viability and the sustainability of the current privatization model.

Similar to the foregoing reason is regulatory oversight as there have been concerns about the adequacy of regulatory oversight and whether the regulatory framework has been effective in ensuring that the DisCos meet their obligations to consumers.

Also, the issue of tariff has been a clog in the wheel of constant power supply across the country. This is as the tariff structure has been contentious, with debates over whether it reflects the true cost of electricity and is fair to consumers. There have also been issues with tariff adjustments and subsidy removals.

Not only that, the level of engagement with stakeholders, including consumers and labor unions, have been criticized, necessitating the need for more transparent and inclusive decision-making processes. In fact, government’s continued involvement, including holding a significant stake in the DisCos, raises questions about the true extent of privatization and the potential for conflicts of interest.

At this juncture, it is germane to opine that these issues suggest that a comprehensive review of the privatization process is necessary to address the shortcomings and ensure that the objectives of providing stable, reliable, and affordable electricity to Nigerians are met. Such a review could lead to reforms that might include changes in regulatory policies, restructuring of the DisCos, or revisions to the privatization agreements.

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