The Privatization of the Electricity Sector in Nigeria

By Chinwe Chiwete

The full implementation of the Electric Power Sector Reform has been a key priority for the administration of President Goodluck Jonathan in Nigeria. As noted in the Roadmap for Power Sector Reform, for over two decades, the stalled expansion of Nigeria’s grid capacity, combined with the high cost of diesel and petrol generation has crippled the growth of the country’s productive and commercial industries. The Federal Government was therefore determined to pursue the fundamental changes to the ownership, control and regulation of the sector as outlined in the National Electric Power Policy (2001) and enshrined in the Electric Power Sector Reform (EPSR) Act of 2005.

The power sector reform was structured into several phases starting with the creation of the Power Holding Company of Nigeria (PHCN) as the holding company of the assets of the defunct NEPA. The PHCN was subsequently unbundled into 18 successor companies which paved the way for the privatization program. On the 30^th September 2013, the Federal Government formally handed over the unbundled Power Holdings Company of Nigeria, PHCN, to private organizations that bought it. Licenses and share certificates were handed over to these investors, an event which has ushered in a new beginning for Nigerians.

With the entrance of private players into the power sector, the possibility of market manipulation and other abuses cannot be overruled; consequently, consumers need to be adequately protected from these private sectors who are essentially profit driven. Till date, the Nigerian Competition Bill is yet to be passed into law meaning that competition related issues in the power sector will be regulated by the Nigeria Electricity Regulatory Commission (NERC or Commission) as the regulator of the power sector established under the EPSR Act. The EPSR Act empowered the NERC to monitor the Nigeria electricity supply industry with regards to its potential for additional competition and to monitor electricity businesses and markets to determine whether there is or may be an abuse of market power and where such exist take the appropriate actions which include issuing a cease order and imposing fines.

Clearly Nigeria seems to be adopting more of sector regulation of competition as against speeding up actions on the pending Competition Bill. This can also be seen from other existing laws for example, the Securities and Exchange Commission (SEC) regulates competition in terms of mergers and acquisitions as provided under the Investments and Securities Act 2007 (ISA) while the National Communication Commission (NCC) regulates competition in the telecommunication sector. Even though sector regulation may sometimes be necessary particularly for issues peculiar to that sector, there are disadvantages one of which is that the government may be less inclined to promulgate the pending Competition Bill which will leave many vital sectors unregulated. In addition, one foresees a case of over-regulation for certain sectors in the event that Competition Law finally comes into force. To address the possible conflict and power tussle between these sectoral regulators and the Commission created by the Competition Bill, the Federal Competition Bill at least made a comforting provision to the effect that the Commission created under the Bill will coordinate the activities of sectoral regulators as they relate to, or may impact on, competition with a view to maintaining coherence in policy implementation.

The privatisation exercises no doubt hold many advantages for Nigerians; however, more harm will be done if these private sectors are not well regulated. The way forward still remains for Nigeria to have a Competition Law as the basic legal framework upon which other sector regulations can build upon.