AN ASSESSMENT OF THE ECONOMIC IMPLICATIONS OF PRIVATISATION OF THE POWER SECTOR AND ELECTRICITY SUPPLY IN NIGERIA

CHAPTER ONE

INTRODUCTION

Background of the study

Any society's development, wealth, and safety on a national level, in addition to its rate of industrialization, are all directly tied to the reliability, accessibility, and efficacy of its electrical power supply. It is also a well-known fact that any country that has the ambition to advance would do so at its own risk if it ignores the electricity sector. One of the most noticeable shortcomings in Nigeria's infrastructure is the country's lack of adequate electricity generation and distribution. Because of the erratic nature of the electric power in Nigeria, the country's economy is often referred to as a generator economy (Ekpo, 2019). According to estimates provided by the National Association of Small Scale Industries (NASSI) and the Manufacturers Association of Nigeria (MAN), the members of both organizations spend an average of around N2 billion (approximately $12 million) per week on self-power generation (Anyanrouh, 2017). The results of a series of polls regarding the power sector that were carried out by NOI Polls Ltd during the second quarter of 2013 revealed that approximately 130 million out of the total population of 160 million Nigerians generated their own electricity through alternative sources in order to compensate for the inconsistent power supply. This represents 81% of the population. According to the findings of the survey, a combined average of 69 percent, or 110 million Nigerians, incurred increased expenditures on alternate forms of energy provision (Anyanrouh, 2017). Recent figures on the usage of generating sets in the nation, which were provided by the Director General of the Centre for Management Development, Dr. Kabir Usman, indicated that about 60 million Nigerians spend N1.6 trillion on generators yearly (Obasi, 2013). The chronic power shortage was brought on by the inability of the existing power plants to keep up with the steadily rising demand for electricity. The gap between supply and demand is caused by a multitude of factors, including: antiquated and run-down plants, with 36% of installed capacity being over 20 years old; 48% being over 15 years old; and 80% being over 10 years old (Adenikinju, 2019); a lack of and poor maintenance of existing plants; and inefficient managerial practices. The present power production for the nation is 3,800 Megawatts, and the average annual energy consumption for each individual is 136 Kilowatt-Hours. When compared with the average per capita energy use in Libya (4,270 KWH), India (616 KWH), China (2,944 KWH), South Africa (4,803 KWH), Singapore (8,307 KWH), and the United States (13,394 KWH), Nigeria's electricity consumption on a per capita basis was among the lowest in the world (Idowu, 2020). therefore this study seeks to examine the economic implications of privatisation of the power sector and electricity supply in Nigeria

Statement of the problem

According to the FRN document (2020), the majority of the infrastructure for the power sector was constructed in the 1970s and 1980s. Since that time, the country has suffered from the impact of poor quality and limited availability of electricity supply, which has had a negative impact on national development. At the moment, Nigeria is dealing with a severe energy crisis as a result of a decrease in the amount of electricity generated by the country's domestic power plants. These power plants are essentially run down, outdated, unreliable, and in an appalling state of disrepair, which is a reflection of the lack of a maintenance culture in the country as well as the gross inefficiency of the public utility provider (Ikeme and Ebohon, 2015). The idea of privatization arose as a result of efforts made by governments in practically every nation on the planet to improve the effectiveness, efficiency, and profitability of state-owned businesses; these efforts led to the development of the notion. According to Laleye (2021), privatization has a variety of goals, one of which is to "initiate the process of the gradual cessation to private sector of public enterprises and utilities that, due to the nature of their operations and other socio-economic factors, are best performed by the private sector." Among these goals is the explicit goal of "initiating the process of the gradual cessation to private sector of public enterprises and utilities." As a consequence of this, the Nigerian National Assembly passed the Electric Power Sector Reform (EPSR) Act in 2005. This resulted in the privatization of electricity generating and distribution in the nation, which commenced in November of 2013. In Nigeria, living without reliable access to electricity has become routine (El-Rufai, 2017). Even though energy generation and distribution in Nigeria have been privatized, it is abundantly clear that the country's electrical supply leaves a great deal to be desired. The vast majority of Nigerians continue to suffer from frequent power outages. According to Makoju (2019), in spite of the exceptional endowment in energy sources, Nigeria has failed to meet the yearnings of her teeming population for adequate, stable, reliable, and affordable electricity to drive the economy. This is despite the fact that Nigeria possesses a unique endowment in energy sources. Hence, the study examines economic implications of privatisation of the power sector and electricity supply in Nigeria.

Objective of the study

The primary objective of the study is to examine the economic implications of privatisation of the power sector and electricity supply in Nigeria. The specific objectives is as follows:

To Assess the impact of the privatization programme Nigeria 

To identify the challenges of providing stable power supply by privatized companies.

To find out the economic implications of privatization of the power sector.

To make recommendation on how electricity supply can be improved in Nigeria.

Research Questions

The following questions have been prepared for the study:

What is the impact of the privatization programme Nigeria?

What are the challenges of providing stable power supply by privatized companies?

What is the economic implications of privatization of the power sector?

What are the recommendation on how electricity supply can be improved in Nigeria?

Research hypotheses

The following hypothesis have been formulated for the study:

H0: Privatization of the power sector does not have any implication on the Nigerian economy.

Ha: Privatization of the power sector does have any implication on the Nigerian economy.

1.6 Significance of the study

The study will be significant as it would serve as a useful guide to the Bureau of Public Enterprises (BPE) which is responsible for implementing the policies of privatisation and commercialisation in different sectors of the Nigerian economy. This study would invariably give the Bureau the necessary direction on how the privatisation programme in the power sector could be effectively fine-tuned and restructured. The study would also be of immense benefits to critical stakeholders in Nigeria’s privatised electricity industries such as the Nigerian Electricity Regulation Commission (NERC), the privatised Electricity Generation Companies (GENCOs) and Electricity Distribution Companies (DISCOs) as well. It would assistthese stakeholders in ensuring that the challenges facing Nigeria’s power sector reform programme are effectively curbed.

Scope of the study

The study will assess the impact of the privatization programme Nigeria. The study will also identify the challenges of providing stable power supply by privatized companies. The study will further find out the economic implications of privatization of the power sector. Lastly, the study will make recommendation on how electricity supply can be improved in Nigeria.

Limitation of the study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection (internet, questionnaire, and interview), which is why the researcher resorted to a moderate choice of sample size. More so, the researcher will simultaneously engage in this study with other academic work. As a result, the amount of time spent on research will be reduced.

1.9 Definition of terms

Economic: relating to economics or the economy.

Privatization: the transfer of a business, industry, or service from public to private ownership and control.

Power sector: any sector relating directly or indirectly to the activities of production, marketing and/or directly or indirectly to the sale of electricity or heat or associated products and services.

Electricity supply: all energy, capacity and other services supplied to and included in the electricity rates of retail electricity consumers in this State.