By Alabi Williams / Posted 21 Apr 2025
Nigeria’s electricity sector is bedeviled by governance and accountability issues. More than a decade after it was supposedly privatised and primed to prosper for operators and consumers, it hasn’t.
Despite bailout sums by government, the Central Bank and the World Bank, the sector still makes life very hard for the populace. Power Generating Companies (GenCos) sent panic among the value chain last week, when they threatened to shut down operations.
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Jokes apart, the implications would be dire if GenCos were to summon the courage to down tools. But they may not, because that action would endanger their investments far more. That threat, in simple language could mean that consumers should brace up for increased tariffs. That’s a common refrain for operators, government and their offshore advisers, including the World Bank. They’re decided that consumers are not paying enough.
Electricity is the enabler of economic growth, either for small time entrepreneurs or the big-time manufacturers. It appears that private citizens, the weakest link in the power system are the ones to be surcharged for the failure of others. In the operation of the system, there are loopholes and weaknesses that allow liabilities to accumulate and just like in the petroleum sector, the simplest solution is to share the liabilities among hapless citizens.
If government refineries are not working, citizens are punished for that. If government is unable to police the borders to rein in activities of smugglers, citizens are punished for it. If government cannot play effectively in the forex market and the naira fails to measure up, they find a way to transfer the costs to consumers.
In 2013, under former president Goodluck Jonathan, the sector was segmented into companies that were supposedly sold to private investors. Despite the attempt to sanitise the sector, integrity is still absent, more than 10 years after. A public officer who is mindful of personal integrity would be circumspect if assigned the task to manage electricity in the country.
An insight into the perfidy could see a power minister abandoning his assignment halfway. The late Chief Bola Ige had to abandon the ministry when he encountered the demons. For a high-capacity public servant, he had thought it was going to be an easy assignment.
Former Governor of Lagos State, Babatunde Fashola, equally took a walk. In the 2015 campaigns, Fashola, also a high-capacity public officer, had promised during a media chat that their government would provide final solution to electricity problems in the country. They haven’t.
Those who chose to stay know what they’re looking for. A former Minister of Power, Saleh Mamman, is facing multiple charges bordering on money laundering and conspiracy to divert public funds. He served under former President, Muhammadu Buhari, between 2019 and 2021.The Economic and Financial Crimes Commission (EFCC), arraigned him inan ongoing N33.8 billion money laundering case.
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The Independent Corrupt Practices and Other Related Offences Commission (ICPC), also arraigned the suspended Executive Director of Rural Electrification Agency (REA), Netufo Olaniyi Alaba and one Hassan Arivi Saddiq, for N15 million contract fraud. There are other fraud cases pending against four other staff members of REA, to the tune of N1.066,000,000. In March 2024, President Tinubu approved the suspension of the former CEO of REA, Ahmad Salihijo Ahamad and three directors, following corruption allegation.
The back and forth regarding the Mambilla Power Project, supposedly awarded in 2003, but yet to witness ground-breaking ceremony 22 years after, should give more clue to how sleazy the power sector has been. Former presidents Obasanjo and Buhari had to go to Paris before a court of arbitration, to explain what they knew of the project. Huge sums have allegedly been paid as compensation to owners of the land and for clearing the site to commence work. No work has been done.
Nothing seems to have changed between what used to be the National Electricity Power Authority (NEPA) and the successor companies. Sadly, there could be a little plus for NEPA in some areas, which the current owners of power assets cannot be credited with. Under NEPA, consumers didn’t pay for meters and connection materials. NEPA supplied everything. NEPA provided an element of energy security for low-income population and did not segment consumers into bands. It’s an unfortunate situation to reminisce NEPA’ s odious past, but one is constrained by the antics of current owners and a conniving government.
When power Generation Companies (GenCos) threatened to shut down operations because of the over N4 trillion debt owed them by the Federal Government, many were confused whether the debt was for electricity bills government department and agencies failed to settle. Government is afflicted by the pathetic habit of owing for services. In 2024, it was reported that government owed about N100 billion in electricity outstanding debt. It could be more.
It is not the debt the GenCos are worried about. The GenCos said they have continued to bear the brunt of liquidity crisis in the sector. They say they are unable to get external financial support from the World Bank to due to other participants’ inability to meet their respective distribution-linked indicators (DLIs) as set out in the Power Sector Recovery Programme (PSRP). GenCos also lamented their inability to access forex for maintenance needs, which they said is dollarised, making case for a specialised window in the Central Bank.
A casual observer would wonder how the FG is perpetually responsible for the survival of private players in the power value chain. Apart from spending bailout funds from appropriations, government guarantees loans for Distribution Companies (DisCos) to meter consumers and for projects undertaken by the Transmission Company of Nigeria (TCN). It is understandable that the Federal Government owns the TCN wholly.
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Power privatisation in Nigeria is not working the way it was designed, much unlike in telecommunication, where growth is measurable despite the tough operational environment. One is not aware that government is tasked to arrange bail out funds for our telecom companies the way it does for the power sector. If there are issues, the regulator of telecoms, NCC, takes charge to ensure matters don’t boil.
In August 2024, the GenCos warned that there were mounting risks in the sector and advised government to do the needful. At that time, the Nigerian Bulk Electricity Trading Company (NBET) had ceased to be the insurer of energy produced. The implication was that the Federal Government would no longer bear risk for failures of acts of omission and commission in that segment of the market. At that time, operators said they were owed about 71.28 per cent of monthly invoices. The risk would grow as power generation improved, so the GenCos needed assurances that their liabilities would be securitised.
Meanwhile, the Federal Government had been advised by the International Monetary Fund (IMF) to exit subsidy payment for electricity. The GenCos feared that the non-provision for subsidy in the 2024 budget meant government had abolished the buffer at a time revenue shortfall was estimated to be around N2 trillion, in addition to the over N1 trillion outstanding debts.
The GenCos thus requested for a technical and commercial reappraisal of the Nigerian Electricity Supply Industry (NESI). They were specific that limiting government’s risk to mere 1,357 MW amid projection by government that generation had grown beyond 6,000 MW calls for a review of the NESI.
On its part, government has promised to pay N2 trillion of the N4 trillion debt owed to GenCos before the end of 2025. The Minister of Power, Adebayo Adelabu, said: “Almost all of the debt is inherited, while about half came from 2024. There are plans under way to clear the debt; while I am not sure that the debt will be cleared 100 per cent. It will be paid gradually.”
This is hardly a statement the GenCos can take to the bank. For a government that is not good at settling debts, the worry is that it might grow geometrically as the value of the naira continues to take the heat.
Adelabu added: “The modes of payment are of two ways: we have some budgetary allocation that will facilitate cash payment and we are also in discussion with GenCos to get them some promissory notes.”
Indeed, government claims to have a N2.36 trillion to spend on electricity subsidies for low-income consumers in 2025. How fastidious it would be in dispensing is another matter, considering that of the N2.37 trillion subsidy claim in 2024, only N450 billion of it was cash-backed. It is easier to make promises than fulfill them.
Asking GenCos to get promissory notes when outstanding debts have not been cleared does not offer much solution. It would only pile up debts until the system reaches an inevitable breaking point.
The case with the distribution companies may be worse. The debts they owe are huge. In 2022, both DisCos and GenCos were said to owe banks approximately N836 billion. At some point, the CBN decided to take action to address debts owed by some DisCos by escrowing their accounts. It was discovered that they were not fiscally disciplined and there was need for the CBN to ensure they pay their debts, including payment for electricity sold to them. Five DisCos went to court to challenge the decision, citing a breach in the agreement they had with the Bureau of Public Enterprises (BPE), when they bought over the assets.
There are serious issues to deal with in the sector, including reviewing the Act that enabled the privatisation exercise. The Senate had promised to look into that when the Enyinnaya Abaribe Committee that looked into the poor state of the sector presented its report. It declared the power privatisation a total failure. It now appears that was another of lawmakers’ emotional outbursts that carry no weight. They have since moved to other matters that have no relevance to good governance.
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It is almost two years after inauguration and Nigerians are eager to feel Mr. President’s promises in the sector. His adviser on Oil, Gas and Power, Olu Arowolo Verheijen, is always a delight to watch when she articulates the Tinubu power agenda. But sadly, it is bereft of action.
Note: This article was first published by The Guardian Newspaper.
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