Problems of Electricity Distribution in Nigeria

Nigeria has had an energy supply crisis for as long as many can remember. This is the poor performance of the power sector provide adequate power supply in spite of the country being Africa’s largest oil producer and having some of the world’s largest deposits of coal, oil, and gas. This is the reason for constant blackouts in Nigeria and the source of the most popular slang, “NEPA has taken light”. NEPA and later, PHCN which stands for National Electric Power Authority and Power Holding Company of Nigeria, respectively were the names of the public enterprise responsible for the control of power before the privatization of the power sector.

The average Nigerian has always thought the failure of the power sector is a result of the ineffectiveness of the government. However, even after the privatization of the power sector, not much has improved. This article is on the problems of electricity distribution in Nigeria.

Problems of Electricity Distribution in Nigeria

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Infrastructure Constraints

The first problem of the Nigerian power sector is the lack of infrastructure needed to meet the electricity demands of the nation. Some of these infrastructural problems include:

Undiversified energy sources for electricity: Nigeria still largely makes use of fossil fuels to generate electricity and hydroelectricity.

Insufficient gas pipelines

Obsolete generation plants and equipment

Inadequate and poorly maintained transmission and distribution networks such as transformers

Vandalism: Theft and vandalism of transformers and power cables is prevalent in Nigeria

Government rules and Policies 

The problem of electricity distribution in Nigeria can also be traced to the enforcement of rules and policies by the government that do not encourage investment in the power sector. For example, the operations of thermal power in generating electricity have been hindered by the shortage of gas, partly due to the policy of the government on pricing. Power companies do not pay so much for gas which then discourages international oil companies from investing more in the construction of the facilities that will help to gather and process the country’s gas for domestic use. Also, the deregulation of domestic fuel prices by the Nigerian government is what has caused the reluctance of private investors in building oil refineries in spite of the fact that the government has issued several licenses to private companies to build oil refineries in Nigeria. Although the government has tried to gradually raise gas prices so as to encourage gas firms to expand their capacity, it has been a slow process.

Low tariffs

The power sector records increased financial losses due to deficits caused by low tariffs compared to the cost of production and service delivery.

Problems of the Power sector in spite of Privatization

Many Nigerians thought the privatization of the power sector was the miracle needed in the power sector. Although this move has taken away the bureaucracy that plagued the sector during government control, it, however, did not take away the structural problems that plagued the sector before privatization. These structural problems include:

Shortage of gas supply for thermal plants

The culture of unpaid electricity bills by the masses

Obsolete and poorly maintained transmission equipment

Obsolete generation facilities: The new operators of the power sector have had to deal with the use of the same old and poorly maintained facilities to generate power.

Low prices

The payment of low prices by electricity consumers discourages private investments which are needed for the sector to develop. Under the Multi-Year Tariff Order (MYTO), introduced in June 2012, the government has had to raise prices paid by electricity consumers to gradually make tariffs more reflective of cost. The most recent adjustment to prices (in 2015) raised prices by an average of 45% wherein Lagos, small residential power users now pay N24 (US$0.12) per kWh while heavy domestic users pay N29 per kWh. The rise in prices was met by huge criticism from trade unions and groups who complained that the rise in price was unjustified because there has not been any significant improvement in services delivered by power companies. Many also complained that the majority of the Nigerian population cannot afford the new charges because they live on a low income. Asides major protests in cities all around Nigeria that demanded a reversal of the tariff increase, the national assembly also called for a reversal of the tariff naming it a means of extortion of the Nigerian masses.

While the points of high prices not being affordable by the Nigerian masses may seem morally sound, it is not practicable. Operators of the power sector need investments in equipment, facilities, and employment of adequate manpower in order for an improvement in services to be seen, this will in turn result in an increase in production costs. In order for the sector to regularly produce the services the Nigerian masses require, there needs to be at least enough revenue to cover the cost of production. This has to be paid for, either through government subsidies or the masses.

Lack of Funding

One of the main issues with the power sector in Nigeria today is the inability of the government to finance the provisions of equipment that can sustain even the current level of power supply, talk less of expanding services to include the millions who do not yet have access to power.

The federal government can borrow more to fund but the existing debts and low revenue generation mean that the government is limited in this option and could slide back into debt troubles.

The next option would be an investment from private individuals and companies. However, these ones are unlikely to invest in infrastructure projects because of the little or no profitable returns caused by the government-imposed utility and low fuel prices.

The power sector is caught up in a web. How do you explain to a people who are now frustrated with the power cuts in Nigeria (in spite of the abundance of resources), that there is need for higher pricing policy and possible removal of subsidies so that there can be more investments and funding which is what will boost the performance of the sector to their expectations.