De-monopolization of the Nigerian power sector: Perspectives and reflections

Introduction

The Nigerian president recently signed a constitutional amendment to de-monopolize the electricity value chain at the national level. This came after the legislators voted for the bill to make this amendment about a year ago.

The amendment empowered the state governments to make laws on the generation, transmission and distribution of electricity in areas covered by the national grid.

State governments can now manage and regulate the production and “transportation” of electricity in their states. However, this power does not extend to interstate or international electricity infrastructure development.

Sectorial impact

This is excellent news for Nigeria, Nigerians, and the power sector for several reasons:

Two (good) heads are better than one: The State governments can now independently source funding for the development of electricity resources and shore up additional investment into the NESI which can positively impact the system.

Private sector participation: The Nigerian electricity sector has been government-driven for a long time. This development will attract many private and independent players to the sector. The flexibility in scale can be the panacea for small and medium-scale organizations to play significant roles in the NESI which has always been dominated by “heavyweights”.

Decongestion of the central system national: With the development of regional electricity systems, some customers will move to regional players. This will lead to the decongestion of the national grid which will free up more resources on the central national grid for improved service while the federal government and national players continue to deepen capacity on the national front.

Competition and cost: With the advent of decentralized systems, there is a massive opportunity for capital cost reduction and tariffs to be lowered as transmission costs can be substantially minimized.

Healthy competition: This bill will introduce new players to the “party” which will stiffen competition for improved service delivery.

RE penetration: Penetration of renewable and distributed energy resources which holds the key to bridging electricity gaps in Nigeria will now be pertinent and widespread due to decreasing cost and quick implementation timeline.

Decentralization of Job and technical capacity development: The jobs and capacity development opportunities in the power sector of Nigeria have been concentrated around specific geographical locations. With this new development, jobs can be created in the electricity sector in each state as well as knowledge development and transfer. There will be opportunities for organizations at the local level to participate in NESI.

Sustainable development: This is an opportunity for many of the sub-national state governments to participate actively in sustainable development (SDG 7) after years of being dormant. The devolution of "electricity power" to the state governments will only aid the Nigerian Energy Transition Plan.

Institutional learning opportunity: State government can learn from the national electricity grid to ensure that there is no repeat of their past mistakes in terms of policy, technology, operations and people management. This is an opportunity to unlearn, learn, relearn and glean.

So, what next?

State governments must now create, review, and update (existing) electricity regulatory frameworks. This will include the strengthening of the electricity boards, state rural electricity agencies and ministries for resource development.

The federal government should provide an offtake funding mechanism for the state governments to commence the development of their state electricity sector.

State government should begin the engagement of sectoral experts, the private sector, national organizations and transnational networks for technical and non-technical support and development.

The national players in the NESI (especially GENCOs and DISCOs) need to revisit their playbooks and commence the development of strategic frameworks to combat the looming changes.

Comments

Special appreciation should be given to the Lagos State government and possibly the NGF for this effort as well as everyone who has been pushing this laudable program for years.

I see states like Lagos, Kano, FCT and Rivers rushing to the drawing board for capacity improvement and implementation.

Folks, to whom much is given……I will be watching critically the actions of state governments in light of this development. It is a new dawn in the Nigerian power sector.

Reference: placng.org