Nigeria’s power sector is characterised by inadequate infrastructure, poor governance, outdated regulations, and persistent inefficiencies. These also contribute to unreliable electricity, frequent blackouts, and an inability to meet the demands of its rapidly growing population and industrial base.
In recent years, the Nigerian government has introduced a series of electricity policy reforms aimed at improving the reliability, accessibility, and sustainability of the country’s energy sector. These reforms are designed to address the challenges facing the sector and guide Nigeria towards achieving its energy needs in a more sustainable manner.
The Privatisation of the Power Sector
A major milestone in Nigeria’s electricity policy reforms was the privatisation of the power sector. In 2013, the Nigerian government embarked on a bold initiative to privatise its power generation and distribution companies as part of the broader reforms under the Electric Power Sector Reform Act (EPSRA) of 2005. The privatisation aimed to increase efficiency, attract private sector investment, and improve service delivery in the electricity sector.
The privatisation saw the unbundling of the Power Holding Company of Nigeria (PHCN) into 18 successor companies, which included 11 distribution companies (DisCos), 6 generation companies (GenCos), and the Transmission Company of Nigeria (TCN). The government believed that private sector involvement would bring the much-needed capital, expertise, and technology to improve the country’s electricity supply. However, while privatisation led to some improvements, such as better financial management and increased transparency in certain areas, challenges such as underinvestment, operational inefficiencies, and high levels of technical and commercial losses persist.
- Electric Power Sector Reform Act (EPSRA) and Regulatory Framework
The EPSRA passed in 2005, was designed to provide a legal and regulatory framework for the reform of Nigeria’s power sector. This act sought to encourage private sector participation, improve the financial sustainability of the sector, and promote competition in electricity generation. Key features of the EPSRA include the establishment of the Nigerian Electricity Regulatory Commission (NERC), which is tasked with overseeing and regulating the power sector, ensuring fair practices, setting tariffs, and ensuring the sustainability of the sector.
While the EPSRA provided the framework for reform, its implementation has faced challenges. For instance, one of the main issues has been the lack of cost-reflective tariffs that would allow electricity companies to generate enough revenue to reinvest in infrastructure and improve service. The Nigerian government has occasionally subsidised electricity prices, which has made the sector financially unsustainable. As a result, NERC has struggled to implement reforms that align the electricity tariff structure with market realities.
- National Energy Policy and Renewable Energy Focus
Nigeria’s energy policy has undergone several shifts, particularly with the increasing global emphasis on environmental sustainability and renewable energy. The National Energy Policy (NEP) of 2003 provided a broad framework for the energy sector, focusing on increasing energy access, improving energy efficiency, and promoting renewable energy. Over time, however, it became clear that more concrete steps were necessary to meet these objectives, especially in light of the country’s energy deficits.
In recent years, the Nigerian government has sought to expand its focus on renewable energy as part of its energy transition strategy. The Renewable Energy and Energy Efficiency Policy (REEEP) introduced in 2015 aims to encourage the use of renewable energy sources like solar, wind, and hydropower. It sets ambitious goals, including achieving a 30 per cent renewable energy share in the national energy mix by 2030. The policy also focuses on improving energy access in rural and off-grid communities by supporting decentralised renewable energy solutions such as solar mini-grids and solar home systems.
The integration of renewable energy into the grid is a crucial part of Nigeria’s strategy to diversify its energy mix and reduce its dependency on fossil fuels. This transition is seen as a way to promote sustainability, reduce greenhouse gas emissions, and address the climate crisis. While progress has been made with small-scale renewable energy projects, challenges such as inadequate infrastructure, financing, and policy coordination have slowed the pace of renewable energy adoption.
- Power Sector Recovery Program (PSRP)
In 2017, the Nigerian government launched the Power Sector Recovery Program (PSRP) to address the financial and operational challenges facing the power sector. The PSRP is a comprehensive plan designed to restore the financial health of the power sector, improve operational efficiency, and increase electricity supply. The program aims to address critical areas such as tariff adjustments, the improvement of payment collections, the reduction of technical and commercial losses, and the rehabilitation of old and inefficient power plants.
A key component of the PSRP is the introduction of a market-based tariff structure. The government has emphasised the need for cost-reflective tariffs, which are crucial for improving the financial viability of the power sector. However, the process of implementing tariff hikes has been contentious, with consumers protesting the rising electricity prices, especially in the context of Nigeria’s high poverty rate. The PSRP also seeks to address the longstanding issue of poor power distribution by improving the efficiency of the DisCos through better management and improved infrastructure.
- Electricity Sector Governance and Institutional Reforms
The governance of Nigeria’s power sector has long been plagued by inefficiencies, corruption, and lack of accountability. As part of the reforms, the government has sought to address these issues by promoting greater transparency and strengthening regulatory bodies like NERC and TCN. Efforts to improve governance include the introduction of stricter regulatory frameworks, the establishment of more rigorous performance targets for electricity companies, and efforts to ensure that power sector funds are spent efficiently.
The reform process also involves restructuring and strengthening the institutions responsible for electricity transmission, distribution, and regulation. This includes efforts to improve the operational efficiency of TCN, which has historically struggled with maintaining the transmission network and expanding grid capacity. Institutional reforms are aimed at ensuring that the power sector operates as a market-driven, competitive industry that delivers quality service to consumers.
- Challenges and the Road Ahead
While Nigeria’s electricity policy reforms have made progress, several challenges remain. Issues such as inadequate investment, persistent power outages, poor infrastructure, and a lack of coordination between the federal and state governments continue to hinder the sector’s growth. Furthermore, the slow pace of renewable energy adoption, financial instability in the sector, and political interference in tariff-setting continue to delay the desired outcomes.
The road ahead requires sustained efforts to address these challenges. It will require a balance between privatisation, regulation, and government intervention. Moreover, the government must continue to prioritise investment in both grid and off-grid solutions, create favourable policies for renewable energy, and address the financial and operational weaknesses of the power sector. Ultimately, successful electricity policy reforms in Nigeria will pave the way for a more reliable, affordable, and sustainable energy future for the country.
Conclusion
Electricity policy reforms in Nigeria are essential to overcoming the country’s power sector challenges and achieving energy security. While progress has been made, much work remains to be done. Privatisation, improved governance, renewable energy adoption, and effective regulatory frameworks will be key to Nigeria’s successful energy transition. By addressing existing challenges and implementing robust reforms, Nigeria can ensure that its energy sector contributes effectively to economic growth, social development, and environmental sustainability.