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Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
www.jmest.org
JMESTN42350093 494
The Nigeria Electric Power Sector
(Opportunities and Challenges)
Onochie U.P1, Egware H.O2 and Eyakwanor T.O3
1,3 National Centre for Energy and Environment
Energy Commission of Nigeria, University of Benin Benin City, Nigeria
1onochieuche@yahoo.com,3topeeyakwanor@yahoo.com
2Department of Mechanical Engineering, University of Benin, Benin City, Nigeria
2henryegware@yahoo.com
Abstract—Regular and adequate power supply
is the hallmark of a developed economy. Any
nation whose energy need is epileptic in supply,
prolongs her development and risks losing
potential investors. Again, it is an unavoidable
prerequisite to any nation’s development.
Electricity generation, transmission and
distribution are capital-intensive activities
requiring huge resources of both funds and
capacity. The call for power sector reform in
Nigeria is primarily as a result of inadequate
electricity supply, incessant power outages, low
generating plant availability and high technical
and non-technical losses that have characterized
the Nigerian electricity industry. NEPA as a result
of unbundling and the power reform process was
renamed Power Holding Company of Nigeria
(PHCN) in 2005. In accordance with the Electricity
Power Sector Reform Act 2005, the privatization of
PHCN was finally established in 2013. PHCN was
subsequently unbundled into a transmission
company, TCN, 6 generating companies, Gen-Cos,
and 11 distribution companies, Dis-Cos. Currently,
the transmission capacity of the Nigerian
Electricity Transmission system is made up of
about 5,523.8 km of 330 KV lines and 6,801.49 km
of 132 KV lines. About 23 grid-connected
generating plants in operation in the Nigerian
Electricity Supply Industry (NESI) with a total
installed capacity of 10,396.0 MW and available
capacity of 6,056 MW. Most generation is thermal
based, with an installed capacity of 8,457.6 MW
(81% of the total) and an available capacity of
4,996 MW (83% of the total). Hydropower from
three major plants accounts for 1,938.4 MW of
total installed capacity (and an available capacity
of 1,060 MW).
Keywords—Electricity, Generation,
Transmission, Distribution, Sector reform, Vision
2020
I. HISTORY, OVERVIEW AND CURRENT STATE
OF THE SECTOR
A. Historical Overview
According to [1,2], the history of electricity
production in Nigeria dates back to 1896 when
electricity was first produced in Lagos, fifteen years
after its introduction in England. The total capacity of
the generators used then was 60KW. In other words,
the maximum demand in 1896 was less than 60 kW.
The Nigeria Electricity Supply Company (NESCO)
commenced operations as an electric utility company
in Nigeria in 1929 with the construction of a
hydroelectric power station at Kurra, near Jos.
In 1946, the Nigerian government electricity
undertaking was established under the jurisdiction of
the public works department (PWD) to take over the
responsibility of electricity supply in Lagos State. The
Electricity Corporation of Nigeria (ECN) was
established in 1951, while the first 132KV line was
constructed in 1962, linking Ijora Power Station to
Ibadan Power Station.
However, there was another body known as the
Niger Dams Authority (NDA), which was established
by an act of parliament. The Authority was responsible
for the construction and maintenance of dams and
other works on the River Niger and elsewhere,
generating electricity by means of water power,
improving navigation and promoting fish brines and
irrigation [3]. The electricity produced by NDA was
sold to ECN for distribution and sales at utility
voltages.
Also, Niger Power Review [4] stated in her work,
that in April 1972, the operation of ECN and NDA
were merged in a new organization known as the
National Electric Power Authority (NEPA). Since ECN
was mainly responsible for distribution and sales and
the NDA created to build and run generating stations
and transmission lines, the primary reasons for
merging the organizations were:
1. It would result in the vesting of the production
and the distribution of electricity power supply
throughout the country in one organization which
would assume responsibility for the financial
obligations.
2. The integration of the ECN and NDA should
result in the more effective utilization of the human,
financial and other resources available to the
electricity supply industry throughout the country.
Okoro & Madueme [5] stated in their research, that
since the inception of NEPA, the authority expands
annually in order to meet the ever-increasing demand.
Unfortunately, majority of Nigerians have no access to
electricity and the supply to those provided is not
regular. It is against this backdrop that the federal
Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
www.jmest.org
JMESTN42350093 495
government embarked on aggressive power sector
reforms with the intention of resuscitating NEPA and
making it more efficient, effective and responsive to
the yawning of the teeming populace. NEPA as a
result of unbundling and the power reform process
was renamed Power holding Company of Nigeria
(PHCN) in 2005.
Again, according to Sambo [6], the Nigerian power
sector is controlled by state-owned Power Holding
Company of Nigeria (PHCN), formerly known as the
National Electric Power Authority (NEPA). In March
2005, President Olusegun Obasanjo signed the
Power Sector Reform Bill into law, enabling private
companies to participate in electricity generation,
transmission, and distribution. The government
separated PHCN into eleven distribution firms, six
generating companies, and a transmission company,
all of which were to be privatized. Several problems,
including union opposition, delayed the privatization,
which was later rescheduled for 2006.
However, when the administration of President
Umaru Musa Yar’adua came on board, the
privatisation issue was suspended. He therefore,
unveiled a mission, setting an agenda of
industrializing Nigeria by 2020. The conference was
therefore one of the highest and administrative
governing structures that was considered to proffer
practicable solutions to the power supply problems in
order to achieve this priority goal of the Nigerian
government. Unfortunately, he was unable to
accomplish the mission, due to ill health which
eventually took his life.
In Nnaji [7], a new Power Sector Roadmap was
officially launched by Mr President, Good-luck
Jonathan, on 26th August, 2010. The Presidential
Action Committee on Power (PACP) was created to
remove “red-tape”, achieve policy consistency and
cut-through bureaucracy indecision making by key
stakeholders in power and the Presidential Task
Force on Power (PTFP) was created for day-to-day
planning, developing and driving forward the Reform
Plan for the Nigerian Power sector which was the
Electric Power Sector Reform Act (EPSRA) enacted in
2005.
This Act was to drive the reform processes as
follows:
Transfer NEPA’s assets to PHCN and
subsequent unbundling into: A transmission company,
TCN, 6 generating companies, GenCos, 11
distribution companies, DisCos
NELMCO to take over PHCN stranded assets
and liabilities
Establish a bulk trader of power as a broker
between power producers and DisCos
Establish an independent sector regulator:
(Nigeria Electricity Regulatory Commission (NERC)
charged with the responsibility of tariffs regulation and
monitoring of the quality of services of the PHCN
Provide for a consumer assistance fund
Develop competitive electricity market
Licensing of IPPs and ring-fence distribution
companies
Establish a rural electrification agency, (REA).
B. Current state of the sector
In accordance with the Electricity Power Sector
Reform Act 2005, the privatization of PHCN was
finally established in 2013. PHCN was subsequently
unbundled into a transmission company, TCN, 6
generating companies, Gen-Cos, and 11 distribution
companies, Dis-Cos.
The Federal Government retains the ownership of
the transmission assets. Manitoba Hydro International
(Canada) is responsible for revamping TCN to
achieve and provide stable transmission of power
without system failure. Currently, the transmission
capacity of the Nigerian Electricity Transmission
system is made up of about 5,523.8 km of 330 KV
lines and 6,801.49 km of 132 KV lines [7]. However,
the generation and distribution sectors were fully
privatised and owned by private individuals.
The operating environment is such that the Dis-
COs can purchase power from Gen-COs of their
choice while Gen-COs are allowed to optimise
production cost and hence make competitive offers for
sale of power. The Trans-CO on the other hand is an
independent power Operator (IPO), as well as, an
energy carrier with the responsibility of ensuring
bilateral contracts exist between Dis-COs and Gen-
COs with additional responsibility of issuing
operational guidelines for efficiency of the system [8].
II. STRUCTURE, DEREGULATION AND
LIBERALIZATION OF THE ELECTRICITY
INDUSTRY
According to NPSG [9], the structure of the
Nigerian Power Sector is made up of 3 major sub-
sectors as depicted below:
1. Generation
2. Transmission
3. Distribution
A. Generation
There are currently 23 grid-connected generating
plants in operation in the Nigerian Electricity Supply
Industry (NESI) with a total installed capacity of
10,396.0 MW and available capacity of 6,056 MW.
Most generation is thermal based, with an installed
capacity of 8,457.6 MW (81% of the total) and an
available capacity of 4,996 MW (83% of the total).
Hydropower from three major plants accounts for
1,938.4 MW of total installed capacity (and an
available capacity of 1,060 MW).
Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
www.jmest.org
JMESTN42350093 496
Fig 1: Installed Capacity and Available Capacity in
Nigeria
According to IEA, [10], total installed electricity net
generation in Nigeria was majorly on the Gas Thermal
Plant with 64%, Hydro with 23% and Steam Thermal
Plant with 13%.
Fig 2: Total installed electricity net generation in
Nigeria.
There are 6 successor Gen-Cos in Nigeria.
Table 1: Names and installed capacities of the
Gen-Cos
Source: Nigerian Electricity Regulatory
Commission
B. Transmission
The Transmission Company of Nigeria (TCN) is a
successor company of PHCN, following the
unbundling of the sector, and is currently being
managed by a Management Contractor, Manitoba
Hydro International (Canada). Manitoba is responsible
for revamping TCN to achieve providing stable
transmission of power without system failure.
Currently, the transmission capacity of the Nigerian
Electricity Transmission system is made up of about
5,523.8 km of 330 KV lines and 6,801.49 km of 132
KV lines.
The TCN is made up of two major departments:
System Operator and Market Operator. The Market
Operations (MO) is a department under TCN charged
with the responsibility of administering the wholesale
electricity market, promoting efficiency and where
possible, competition. The system operator is focused
on system planning, administration and grid discipline.
Furthermore, one of the major areas of focus of
Manitoba Hydro International is to reorganise TCN
and ensure that the Market Operator and the System
Operator become autonomous.
C. Distribution
There are 11 electricity distribution companies
(discos) in Nigeria. The coverage areas of the 11
companies are indicated in the map below:
Fig 3: Distribution Companies Source: [9]
Table 2: Key information about the 11 discos
S/N
DISCOs
Percentage Load
Allocation
1
Abuja Distribution Company
11.50%
2
Benin distribution company
9%
3
Eko Distribution Company
11%
4
Enugu Distribution Company
9%
5
Ibadan Distribution Company
13%
6
Ikeja Distribution Company
15%
7
Jos Distribution Company
5.50%
8
Kaduna Distribution Company
8%
9
Kano Distribution Company
8%
10
Port Harcourt Distribution
Company
6.50%
11
Yola Distribution Company
11.50%
Source: Monthly Energy Balance Sheet, October
2013, Transmission Company of Nigeria (TCN)
III. EXISTING POWER PLANTS, IPPs AND
NIPPs
A. Independent Power Producers (IPPs)
According to NPSG [9], IPPs are power plants
owned and managed by the private sector. Although
0%
20%
40%
60%
80%
Total Installed
Capacity
Available
Capacity
0%
20%
40%
60%
80%
hydroelectricity thermal(gas) thermal(steam)
S/n Generation Company Plant Type Capacity (MW)
1 Afam Power Plc (1-V) Thermal 987.2
2 Egbin Power Plc Thermal 1320
3
Kainji/ Jebba Hydro
Electric Plc
Hydro 1330
4 Sapele Power Plc Thermal 1020
5
Shiroro Hydro Electric
Plc
Hydro 600
6 Ughelli Power Plc Thermal 924
Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
www.jmest.org
JMESTN42350093 497
there are Independent Power Producers (IPPs)
existing in Nigeria prior to the privatisation process,
the Nigerian Electricity Regulatory Commission
(NERC) has recently issued about 70 licenses to
Independent Power Producers in order to improve the
power situation in the country. The existing IPPs
include Shell – Afam VI (642MW), Agip – Okpai
(480MW) and AES Barges (270MW).
Table 3: Planned total present and future electricity generation infrastructure in Nigeria as at 2009
N/S
POWER STATION
TYPE
STATE
CAPACITY (MW)
STATUS
1
Egbin
Thermal
Lagos
1320.00
Existing
2
Afam
Thermal
Rivers
969.60
Existing
3
Sapele
Thermal
Delta
1020.00
Existing
4
Ijora
Thermal
Lagos
40.00
Existing
5
Kainji
Hydro
Niger
760.00
Existing
6
Jebba
Hydro
Kwara
578.40
Existing
7
Shiroro
Niger
600.00
Existing
8
Delta
Thermal
Delta
912.00
Existing
9
Orji
Coal
Enugu
20.00
Existing
10
Geregu
Thermal
Kogi
414.00
Ongoing
11
Omotosho
Thermal
Ondo
335.00
Ongoing
12
Papalanto
Thermal
Ogun
335.00
Ongoing
13
Alaoji
Thermal
Abia
405.00
Ongoing
14
Omoku
Thermal
Rivers
230.00
New IPP
15
Rain/Ube
Thermal
Bayelsa
225.00
New IPP
16
Sapele
Thermal
Delta
451.00
New IPP
17
Eyaen
Thermal
Edo
451.00
New IPP
18
Egbema
Thermal
Imo
338.00
New IPP
19
Caliber
Thermal
Cross River
561.00
New IPP
20
Mambilla
Hydro
Taraba
2600.00
New
21
Zungeru
Hydro
Niger
950.00
New
22
AES
Thermal
Lagos
300.00
Commissioned IPP
23
AGIP Okpa
Thermal
Delta
480.00
Commissioned IPP
24
Omoku
Thermal
Rivers
150.00
Approved IPP
25
Obajana
Thermal
Kogi
350.00
Approved IPP
26
Ibom Power
Thermal
Akwa Ibom
188.00
Approved IPP
27
Ethiope Energy Ltd
2800.00
Approved Licenses IPP
28
Farm Electric Supply Ltd
150.00
Approved Licenses IPP
29
ICS Power
624.00
Approved Licenses IPP
30
Supertek Ltd
1000.00
Approved Licenses IPP
31
Mabon Ltd
39.00
Approved Licenses IPP
32
Geometric Ltd
140.00
Approved Licenses IPP
33
Aba Power Ltd
0.00
Licensed Distributor
34
Westcom Tech & Energy Service Ltd
1000.00
License Granted IPP
35
Lotus & Bresson Nig Ltd
60.00
License Granted IPP
36
Anita Energy Ltd
136.00
License Granted IPP
37
First Independent Power Co Ltd
95.00
License Granted IPP
38
First Independent Power Co Ltd
150.00
License Granted IPP
39
Hudson Power Station Ltd
200.00
40
Ibafo Power Station Ltd
640.00
41
Shell Distribution Coy Ltd
100.00
42
Agbara Shoeline Power Co Ltd
1800.00
43
Index thermal power Ltd
1800.00
TOTAL
24,106.00
Source: (Sambo et.al, 2010)
Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
www.jmest.org
JMESTN42350093 498
B. National Integrated Power Projects (NIPP)
The National Integrated Power Project (‘NIPP’) is
an integral part of Federal Government’s efforts to
combat the power shortages in the country. It was
conceived in 2004 as a fast-track public sector funded
initiative to add significant new generation capacity to
Nigeria’s
electricity supply system along with the electricity
transmission and distribution and natural gas supply
infrastructure required to deliver the additional
capacity to consumers throughout the country [9].
There are 10 National Integrated Power Projects
(NIPPs), with combined capacity of 5,455 MW,
scheduled for completion (for ongoing projects) and
privatization in 2014.
Table 4: The NIPPs and their capacities
Source: Niger Delta Power Holding Company
Limited, Transaction Review Conference, Completion
Status of NDPHC Generation Companies
Again, NPSG [9], stated in her work that the
Federal Government has set aside N50 billion in
escrow accounts in 3 Nigerian Banks to serve as a
buffer for losses that the GENCOS may suffer in the
course of power transmission. Draw-downs are only
possible where the stipulated conditions are met. The
Nigerian Bulk Electricity Trading Plc (NBET) will
manage the accounts.
IV. OPPORTUNITIES AND CHALLENGES OF
THE SECTOR
A. Opportunities
According to [11], Nigeria is Africa's energy giant. It
is the continent's most prolific oil- producing country,
which, together with Libya, accounts for two- thirds of
Africa's crude oil reserves. It ranks second to Algeria
in natural gas. Most of Africa's bitumen and lignite
reserves are found in Nigeria. In its mix of
conventional energy reserves, Nigeria is simply
unmatched by any other country on the African
continent. Nigeria has Natural Gas resources that are
estimated to last over a century.
Table 5: Nigeria’s Energy Reserves and Potentials
Source: [12]
Victor and Ismail [8] stated that on successful
completion of the Electric power Sector reform, the
Sector offers the following significant opportunities for
foreign investors.
1. Power sector financing, requirements for
export credit financing, construction of natural gas
transmission and distribution networks and storage
facilities.
2. Operations and management of Power
Stations and Transmission infrastructure.
3. Training programmes for capacity building.
4. Consultancy and advisory services.
B. Challenges
In [6], the total installed capacity of the currently
generating plants is 7,876 MW, but the installed
available capacity is less than 4,000MW as at
December 2009. Seven of the fourteen generation
stations are over 20 years old and the average daily
power generation is below 2,700MW, which is far
below the peak load forecast of 8,900MW for the
currently existing infrastructure. As a result, the nation
experiences massive load shedding.
Through the planned generation capacity projects
for a brighter future (Table 3), it can be estimated that
the average cost for adding a Mega Watt of electricity
is US$1.5million. This demonstrates the resources
required in power supply to develop and particularly
industrialized any country on a sustainable manner,
are large. Based on this index, it therefore can be
estimated that from the staggering current generation
capacity of about 3,000MW in the country, Nigeria
would have to invest a whopping US$150 billion (N18
trillion) to generate additional 100,000MW, to attain
the required for full industrialization of our economy by
2020 which was computed by the Energy Commission
of Nigeria using a growth rate of 13%. The financial
requirement is phenomenal.
Also, the transmission system in Nigeria system
does not cover every part of the country. It currently
has the capacity to transmit a maximum of about
4,000 MW and it is technically weak thus very
sensitive to major disturbances. Again, in most
locations in Nigeria, the distribution network is poor,
the voltage profile is poor and the billing is inaccurate.
As the department, which inter-faces with the public,
S/N NIPPs Capacity (MW) Expected completion date
1 Alaoji Generation Company Nigeria Limited 1,131 Jun-14
2 Benin Generation Company Limited 508 Dec-13
3 Calabar Generation Company Limited 634 Jun-14
4 Egbema Generation Company Limited 381 Jun-14
5 Gbarain Generation Company Limited 254 Jun-14
6 Geregu Generation Company Limited 506 Jun-13
7 Ogorode Generation Company Limited 508 All units commissioned
8 Olorunsogo Generation Company Limited 754 All units commissioned
9 Omoku Generation Company Limited 265
10 Omotosho Generation Company Limited 513 All units commissioned
RESOURCE RESERVES Reserves Billion tonnes
Hydro Power 10,000MW
Hydro Power 734MW Provisional
Fuel wood 13071464 ha Estimate
Animal Waste 61 Million tonnes/year Estimate
Crop Residue 83 Million tonnes/year Estimate
Solar Radiation 3.5-7.0 kwh/m2-day Estimate
Wind 2.4m/s (annual average) Estimate
Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
www.jmest.org
JMESTN42350093 499
the need to ensure adequate network coverage and
provision of quality power supply in addition to
efficient marketing and customer service delivery
cannot be over emphasize.
From the above analysis, the following are some of
the most critical challenges of the power sector
responsible for the generation short falls, transmission
bottlenecks, and distribution problems in Nigeria [12]:
D. Generation Challenges:
Inadequate generation availability due to
regular vandalization of gas lines, and cable lines,
associated with low level of the surveillance and
security on all electrical infrastructures;
Inadequate and delayed maintenance of
facilities;
Insufficient funding of power stations;
Obsolete equipment, tools, safety facilities
and operational vehicles;
Inadequate and obsolete communication
equipment
Lack of exploration to tap all sources of
energy form the available resources; and
Low staff morale
C. Transmission Challenges:
It is funded solely by the Federal government
whose resource allocation cannot adequately meet all
the requirements;
It is yet to cover many parts of the country
Its current maximum electricity wheeling
capacity is 4,000 MW which is awfully below the
required national needs;
Some sections of the grid are outdated with
inadequate redundancies as opposed to the required
mesh arrangement;
The Federal government lack the required
fund to regularly expands, updates, modernize and
maintain the network;
There is regular vandalization of the lines,
associated with low level of surveillance and security
on all electrical infrastructures;
The technologies used generally deliver very
poor voltage stability and profiles;
There is a high prevalence of inadequate
working tools and vehicles for operating and
maintaining the network;
There is a serious lack of required modern
technologies for communication and monitoring;
The transformers deployed are overloaded in
most service areas;
In adequate of spare-parts for urgent
maintenance; and Poor technical staff recruitment,
capacity building and training programme.
E. Distribution Challenges:
Weak and Inadequate Network Coverage;
Overloaded Transformers and bad Feeder
Pillars;
Substandard distribution lines;
Poor Billing System;
Unwholesome practices by staff and very
poor Customer relations;
Inadequate logistic facilities such as tools and
working vehicles;
Poor and obsolete communication equipment;
Low staff morale and lack of regular training;
and
Insufficient funds for maintenance activities.
F. Overall challenges
Victor and Ismail [8] also stated that in order to
enhance generation, distribution and transmission of
electricity supply to the Nigerian Populace, several
“challenges needs to be properly addressed”. These
are as follows:
Policy Somersault
The Power sector suffers from policy somersault
because one administration after another identifies the
sector as key to economic development of the nation
but in trying to address this, it will come up with
entirely new policies instead of continuing with that of
the previous administration.
Project Execution
Since attention was turned to the Power Sector, no
target ever set for power generation has been met.
This can be attributed to the fact that most of the
public NIPP projects are at different stages of
completion. Although, policy makers keep giving
assurances that supply deficit will be addressed in the
shortest possible time. Another problem here is the
centralised grid structure. Nigeria is too large to
operate one grid structure. There is the urgent need to
open up so as to minimise the loss in transmission of
generated power as much as possible.
Inadequate Infrastructure
The last transmission line in Nigeria was built over
twenty years ago. The transmission Infrastructure are
dilapidated and in a state of dis-repair and needing
overhaul. Equally as discussed in the paper most of
the facilities in the sector were put in place in the 70s
when then customer size was very small, today these
facilities – not maintained nor expanded are expected
to serve the growing customer needs.
Inadequate Gas Supply
One of the greatest challenges of the Power Sector
is inadequate gas supply. Outside from unrest in the
Niger Delta region, producers of gas are unwilling to
sell to PHCN as the present policy requires they sell
to PHCN at a reduced price compared to price sold to
other customers. PHCN for whom the government
subsidizes gas would not settle their bills while other
users of Gas does and because the Gas producers
want to stay in business they ignore sale/supply to
PHCN and concentrate on the other users of gas and
this goes on to affect the operation of the Power
stations.
Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
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JMESTN42350093 500
Financial Challenges
The Contract for the construction of Geregu Power
Station was put at One Million and ninety four million,
eight hundred and thirty three thousand and eight
hundred euros (€194,833,800). Check this cost for
one against ten NIPPs across different states in the
country. This is way too much for government alone to
finance. This calls for some other means of financing.
Still on financing, the uncertainty in the regulatory
environment is hampering private investors from
financing electricity projects in Nigeria.
Data Inadequacy
There is no data for correct estimation of the
customers to plan for. This greatly accounts for the
uneven allocation and distribution of available
resources like transformers. This has equally affected
decision making in the sector as evident in the poor
siting of NIPPs away from areas where gas facility is
readily available to far off areas motivated by political
reasons.
Grid System
The National Grid control ties the whole country
strongly as a single control area. This Control centre
is so far from some of the generating stations and this
tend to inhibit effective communication in times of
crisis and furthermore, the transmission lines are so
long that before voltage gets to its destination it would
have dropped considerably and so the supply in these
areas are not adequate.
V. REFORMS AND PROJECTIONS
The call for power sector reform in Nigeria is
primarily as a result of inadequate electricity supply,
incessant power outages, low generating plant
availability and high technical and non-technical
losses that have characterized the Nigerian electricity
industry. The federal government in 2000 adopted a
holistic approach of restructuring the power sector and
privatisation of business units unbundled from NEPA
[13].
A. The Reform Act
In [9], the Electric Power Sector Reform Act, 2005
can aptly be described as the foundation of the
restructured power sector in Nigeria. The Act, which
evolved from the National Electric Power Policy
adopted in 2001, established the basis under which
private companies can now participate in the
generation, transmission and distribution of electricity.
According to Victor and Ismail [8], the Power
Sector reform was embarked upon in March, 2005
due to inadequate supply of electricity, high demands,
and issues with bills. The main goal of the reform is to
accomplish full deregulation of the Electricity Supply
Industry (ESI) in two years after its implementation.
The objectives include making electricity generation
and supply better and available to the customers,
making the sector investor-friendly and dismantling
NEPA’s monopoly. This was achieved through the
passage of the Electric Power Sector Reform (EPSR)
Act which came into being on the 11th of March,
2005.
The reasons given for the reform include:
introduction of competition in the industry as a means
of improving industry efficiency that will result in
providing lower energy prices to end users, Lack of
price transparency in utility operations hence
consumers and regulators demand price transparency
and declaration of cross subsidies among different
users, like many other public owned institutions,
corruption, inefficiency and managerial incompetence
prevailed and the electricity industry showed
inconsistent policy direction and lack of strategy
framework for its sustainable development, policy
decisions by past Government in the ESI were based
on political or administrative interest instead of
efficient resource allocation and cost recovery
necessary for economic development and The
strategic energy policy for the country was never
implemented.
The Act repealed the earlier law establishing
NEPA. Consequently the Power Holding Company of
Nigeria, (PHCN) was set up and charged with
responsibility of providing power supply. It also
restructured the Power Sector from a vertically
integrated structure into eighteen unbundled
autonomous companies comprising one Transmission
Company called Trans-CO, six generation companies
known as Gens-COs and eleven distribution
companies- Dis-COs respectively.
Victor and Ismail [8] also stated that the Act
focused on the liberalization and Privatization of the
sole Power Provider- PHCN while introducing
Independent Power Producers - IPPs. The EPSR Act
nurtures a wholesome market starting with a single
buyer of electricity produced by PHCN and the IPPs
for onward sale to the eleven DisCos that would also
be offered for sale. Again, Inugonam [14] stated that
the Act further provide for the establishment of the
Nigeria Electricity Regulatory Commission (NERC)
which is charged with the following:
Regulate tariffs and quality service
Oversee the activities of the industry for
efficiency
Institutional and enforcement of the regulatory
regime
Licensing of Generation, Distribution,
Transmission and trading companies that result from
the unbundling of NEPA. Legislative authority to
include special conditions in licenses
Provision relating to public policy interest in
relation to fuel supply, environmental laws, energy
conservation, management of scarce resources,
promotion of efficient energy, promotion of renewable
energy and publication of reports and statistics.
Providing a legal basis with necessary
enabling provisions for establishing, changing,
enforcing and regulating technical rules, market rules
and standards.
Journal of Multidisciplinary Engineering Science and Technology (JMEST)
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In November, 2005 NERC was inaugurated and
took full responsibility. Other aspects of the reform
provide for the establishment of the Rural
Electrification Agency (REA), the National Electric
Liability Management Company (NELMCO) which is a
special purpose entity created to manage the residual
assets and liability of the defunct NEPA after
privatization of the unbundled companies.
According to Balogun [15], the Act also provided
for the establishment of a Power Consumer
Assistance Fund (POLAF) to subsidize under
privileged electricity consumers. These key players
and others necessary for the efficient working of the
electricity power sector and their roles are shown in
the table below.
TABLE 6: Nigeria Power Reform Key Players and
Their Functions.
KEY PLAYERS
FUNCTIONS
Presidential Task
Force
Drives the reforms by uniting
different Stakeholders, monitors,
plans and implements projects.
Bureau of Public
Enterprise (BPE)
Drives the privatisation of
government owned enterprise in
the sector like GensCos and
DisCos
Nigeria Electricity
Regulatory
Commission
(NERC)
Regulates the sector, issues
licences and set tariffs.
Nigeria Electricity
Liability
Management
Company
(NELMCO)
Manages legacy liabilities and
stranded assets
National Power
Training Institute of
Nigeria
Provides training required to
support the power sector.
Power Consumer
Assistance Fund
(POLAF)
Subsidizes electricity for
consumers
Source: Victor and Ismail [8]
Again, Victor and Ismail [8] also stated that all the
successor companies and all the agencies mentioned
above have been fully established. The Government
on its part as a way of encouraging private sector
participation in the power sector granted the following
incentives: tax exemptions for the first five years,
custom duty exceptions for importation of power
plants equipment and its auxiliaries and any other
assistance to any IPP that fulfils all technical and
commercial requirements towards building power
plants.
VI. ROLE OF THE ELECTRICITY INDUSTRY IN
ATTAINING NIGERIA’S VISION 20:2020
The Vision 2020 is an economic plan aim at
making Nigeria one of the 20 most developed and
largest economy in the world in the year 2020 [16].
In order to attain this vision 20:2020, the electricity
industry should play the following role:
A. Implementation of the Nigeria Power Policy
There is a need to implement the Nigeria Power
Policy as is contained in the EPSR Act 2005; this will
allow private sector participation in the sector. This
could be achieved by providing favourable platform for
private investors such as a cost effective end user
tariff structure and a systematic withdrawal of subsidy.
Also there is the need to encourage Public Private
Partnership (PPP) as a concession plan for the
distribution sector as a step towards privatisation. This
will enable the private sector to create demand and
will allow IPPs enter into Bi-lateral agreements with
concessionaires.
B. Involvement of the Private Investors
Sale or the concession of NIPPs to private
investors will ensure the fixing and completion of
these projects. Government should transfer or lease
out all its NIPPs to private investors for efficient
management and implementation as this will involve
construction and operation of the plants to meet
present day realities such as, selling electricity to
identified areas of need and allow for quick generation
of power to relieve the present pressure on National
grid. Lastly, the burden of worrying and dealing with
stranded assets and investments will be taken of the
shoulders of government.
C. Right Pricing
The Federal Government of Nigeria should
execute the gas pricing regulation as it is enshrined in
the Gas Master Plan promptly, just as the
infrastructure blueprint is implemented along with the
Private sector. This will help in aggregation of prices,
as well as, putting in place incentives for private
developers.
D. Pre-paid Metering
Efforts should be intensified to provide prepaid
meters to consumers as this will ensure both judicious
use of power as well as cut down on losses incurred
as a result of unsettled bills. It will also reduce the
number of illegal connections and make consumers
pay for electricity consumed.
E. Distributed Generation
As discussed earlier, there is need to strengthen
the Nigeria Grid system from a central controlled
system to one of distributed generation as this will
increase distribution efficiency and greatly reduced
losses incurred from long distance distribution.
Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
www.jmest.org
JMESTN42350093 502
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