Nigeria Plunged into Another Season of Power Outages

Millions of Nigerians are once again facing prolonged periods without electricity, coinciding with an increase in power tariffs. This situation exacerbates the existing disparities between the affluent and the less privileged. Businesses are experiencing reduced revenues, factories are forced to lay off workers, and overall economic activity is severely hampered. The underlying issues stem from a sector plagued by persistent corruption, inefficient management, and systemic failures. Both the Generation Companies (GENCOS) and Distribution Companies (DISCOS) have cited inadequate gas supply as the primary reason for their inability to provide consistent power.

Adding to the discourse, the federal government recently announced the establishment of the Grid Asset Management Company (GAMCO). This move has generated discussions among industry experts who express concerns about repeating past mistakes by creating yet another institution to tackle deep- seated structural problems. The Presidency has stated that GAMCO is intended to offer a rapid solution to challenges such as stranded electricity, weak grid oversight, and transmission constraints. An eleven-member committee has been formed to oversee the company's initial operations, with a target of recovering approximately 1,600 megawatts of stranded electricity within 18 to 24 months.

GAMCO's operational strategy includes entering into concession agreements with the Niger Delta Power Holding Company (NDPHC) for power plants like Omotosho, Olorunsogo, and Ihovbor. Furthermore, the Transmission Company of Nigeria (TCN) is expected to grant GAMCO permission to develop and manage a new 330KV double-circuit transmission line. On the surface, this initiative appears promising, given that stranded electricity has been a long-standing problem in Nigeria, and leveraging private investment for transmission infrastructure seems a practical approach.

However, a significant number of experts and this publication remain skeptical. The formation of GAMCO could potentially worsen the existing problems, adding to the growing number of underperforming institutions within Nigeria's power sector. Over the years, the electricity industry has undergone extensive structural changes, starting with the dissolution of the National Electric Power Authority (NEPA), the former state-run entity responsible for electricity generation, transmission, and distribution. NEPA was succeeded by the Power Holding Company of Nigeria (PHCN) as an interim body before the sector was privatized. Subsequently, PHCN was divided into 18 successor companies: six for generation, one for transmission, and eleven for distribution.

These reforms also led to the establishment of regulatory and specialized agencies, including the Nigerian Electricity Regulatory Commission (NERC) to oversee tariffs and market operations, the Nigerian Electricity Management Services Agency (NEMSA) for enforcing technical standards, and the Nigerian Bulk Electricity Trading Plc (NBET) to manage power purchase agreements between GENCOS and DISCOS. The NDPHC oversees assets under the National Integrated Power Projects (NIPP), while the Nigeria Electricity Liability Management Company (NELMCO) handles inherited debts and pension obligations from PHCN. Additionally, the Rural Electrification Agency (REA) focuses on extending electricity access to underserved communities, and the National Power Training Institute of Nigeria (NAPTIN) is tasked with developing technical expertise. The Bureau of Public Enterprises (BPE) supervised the privatization process, while initiatives like the Presidential Power Initiative and the FGN Power Company were launched to address infrastructure deficits.

Despite this intricate network of institutions, Nigeria generates only about 4,000 to 5,000 megawatts of electricity for its population of over 200 million people. This figure is remarkably low for Africa's largest economy. For comparative purposes, South Africa, with a population of 60 million, possesses over 40,000 megawatts of capacity, while Egypt, with a population roughly half that of Nigeria, produces more than 40,000 megawatts. These comparisons starkly illustrate Nigeria's substantial electricity deficit and cast doubt on the efficacy of the numerous reforms implemented over time.

The establishment of GAMCO, alongside entities like the Nigerian Independent System Operator (NISO), raises pertinent questions. How will GAMCO integrate into an already crowded institutional framework? What will be the fate of ongoing projects such as the Presidential Power Initiative and the FGN Power Company? How will it collaborate with TCN, the Nigerian Independent System Operator, and other relevant parties? Most importantly, can GAMCO achieve outcomes that current institutions are unable to deliver?

When responsibilities overlap and institutional mandates are ill-defined, bureaucratic rivalry frequently supersedes effective coordination, resulting in confusion, inefficiency, and escalating administrative expenditures. Nigeria's electricity sector is not lacking in agencies; rather, it suffers from weak governance, poor coordination, and inadequate infrastructure.

Transmission remains the most significant bottleneck in the sector. Even when power plants are capable of generating electricity, the national grid often lacks the capacity to distribute it efficiently. Instead of creating additional agencies, the government should prioritize strengthening the TCN and modernizing the national grid infrastructure.

Persistent structural issues also continue to hinder progress. Gas shortages frequently constrain the output of many power plants, despite Nigeria possessing vast natural gas reserves. Implementing policies that ensure gas is supplied to generation companies in naira, rather than dollars, coupled with dedicated supply agreements, could stabilize electricity generation. Hydropower facilities remain underutilized due to inadequate water management; improved reservoir control could substantially increase their output. The recently revised Electricity Act provides state governments with the opportunity to engage in electricity generation and distribution, yet few have seized this chance.

Alternative models, such as the Aba Power initiative, have demonstrated potential. This model focuses on localized generation and distribution, providing a relatively dependable electricity supply. The adoption of cluster- based or regional power systems could lessen the nation's dependence on a vulnerable national grid that has historically proven unreliable.

Ultimately, the electricity crisis in Nigeria represents a critical socio- economic challenge. No modern economy can achieve industrialization without a reliable power supply. Manufacturing, scientific research, job creation, and technological advancement are all fundamentally dependent on electricity. For decades, substantial financial resources have been invested in the sector with minimal tangible improvements. It is entirely reasonable for Nigerians to question whether the path to resolution lies in establishing new agencies or in ensuring that existing institutions operate effectively.