The Dilemma of the Nigerian Electricity Sector: A simple solution.
By: Eniola Price
Tags: Electricity, Maps, Power Sector, Nigeria, Prepaid Meter

Paying bills is not as easy as it sounds –

The elements weren’t feeling particularly generous that afternoon; it was beyond hot and the back of my neck got the heavy hand of the sweltering weather. I kept my head down as I hurriedly moved towards the IKDC dealer down the street from my house. Strangely, I felt like I needed more speed added to my already sprint-like pace.

On arrival, I was greeted by a wrinkled forehead mixed with a toothy smile on the face of the attendant. I smiled back in response as a cold wave from the airconditioned room rescued me from the prevailing heat as I made my way into the shop.

“oga, wetin you come do?” I smiled at his question but deep inside me I wore a terrible frown that would have made a playful child suddenly burst into tears. But almost immediately, my spirit came into reconciliation with my outward smile as I thought to myself, this man’s question is valid.

This morning, I realized I had used up the worth of N3,000 unit of electricity. How? Well, in the past one month, I had between 15 hours to 20 hours steady supply of electricity daily- the same amount I spend in 4 months before now.

I’d most likely continue this spending pattern except I regulate it by controlling my use of electricity remotely, in the case of low funds.

Now, what if, we are all metered?

Would we not likely visit the Electricity dealer often?

Would the issues of broken-down transformers, poles and faulty electrical lines be attended to almost immediately?

Would distribution companies risk losing money due to faulty connections and unavailability of electricity to customers?

People say the problems of Nigeria are too complex and it requires an extraordinary intervention which is either too costly, requires foreign intervention or is “out of the black man’s intellectual capacity”. In the end, we tend to pass on the responsibility to the unknown and seek refuge in the claim that only a divine intervention can take us to the ‘promise land’ — But what would you say is complex about the push of a red button that can start a nuclear war?

Many of the solutions to the huge problems can come about by simple actions that produce a ripple effect. A simple turn of a car key starts a 1,350 horse power engine moving at about 440km/hr. If we have established that a lot of ‘huge’ problems require simple and effective events as solution, then we will begin to see that, perhaps our issues remain problematic because we simply lack the will to effectively interrogate them.

Let’s take a look at the Nigerian Electricity sector, whether it requires a simple or complex solution.

The Journey of power generation in Nigeria dates back to 1886 when two (2) generating sets were installed to serve the then Colony of Lagos. By an Act of Parliament in 1951, the Electricity Corporation of Nigeria (ECN) was established, and in 1962, the Niger Dams Authority (NDA) was also established for the development of hydroelectric power. A merger of the two (2) organizations in 1972 resulted in the formation of the National Electric Power Authority (NEPA).[1]

Prior to 2005, NEPA was in charge of generation, transmission and distribution of electric power in Nigeria with a generating capacity of about 6,200Mega Watt from 2 Hydro and 4 Thermal Power Plants for a population of 138.9m people as at 2005.[2]

The Electric Power Sector Reform (EPSR) Act was signed into law in March 2005, enabling private companies to participate in electricity generation, transmission, and distribution. The government unbundled PHCN into eleven electricity distribution companies (DisCos), six generating companies (GenCos), and a transmission company (TCN). The Act also created the Nigerian Electricity Regulatory Commission (NERC) as an independent regulator for the sector. At present, the Federal Government has fully divested its interest in the six GenCos while 60% of its shares in the eleven (11) DisCos have been sold to the private operators. However, the Transmission Company still remains under government.[3]

The Problem

Nigeria’s installed electricity capacity is 12,522Mega Watt, well below the current demand of 98,000Mega Watt. The actual output is about 3,800Mega Watt, resulting in a demand shortfall of 94,500Mega Watt throughout the country. As a result of this wide gap between demand and output, only 45% of Nigeria’s population has access to electricity. [4]

It has been established that there is a constant demand for electricity as residential, commercial and industrial operations depend on its availability but only between %3.9 — %5.33 of the demand for electricity is met. Besides curtailing domestic business activities, the poor state of electricity in Nigeria deters foreign direct investment (FDI) inflows into the country, as investors are weary of high electricity costs and massive shortages.

As at March 14, 2015, a peak power generation of about 4,822 Mega Watt for distribution, but according to The Minister of Power, Works and Housing, Babatude Fashola, the current problem is not power generation, its more of distribution since electricity is not stored. Fashola insisted that 7,500MW of power can be generated. In August 3, 2018, Fashola claimed that generation and transmission has reached 7,000MW, while distribution is at a National high of 5,222MW. (www.vanguardngr.com)

With the current statistics on power generation, transmission and distribution, we can evidently say that distribution of electricity is at %74.6 with the generation and transmission at maximum.



(No, that’s too serious, I need to ease the tension from the read so far, smiles)

Ok, lets talk about two key words here, DEMAND and SUPPLY (disregard the “and” it doesn’t count, does it?)

The Solution

It is a global phenomenon that whenever there is a demand for goods and services, a supply space is always created, a void that needs to be filled up. Every successful business enterprise has always filled the void left by demand, whether publicly evident or hidden — In fact most times, the void left by demand is hidden and that’s why we are not all business owners because not all see these opportunities to supply the demand for a specific product or service.

One can argue that the demand for electricity cannot be 100%, but since we have had up to 74.6% distribution of electricity, it’s safe to pick that as the demand indicator. So, we say that the demand for electricity in Nigeria stands above 74.6% and not bellow it, which is 73,108 Mega Watt of electricity for an ever-increasing population of 210m Nigerians (new population figures by UN)

Now how do we supply 73,108 Mega Watt demand?

Let’s all get into character, be it Elon Musk, Mark Zuckerberg, Travis Kalanick…I choose Aliko Dangote, no offense, I have a condition called ‘naija bias’

I propose a prepaid/postpaid metering system for every Nigerian… Simple right? And of course, it’s common knowledge, but don’t be disappointed yet, let’s dive into details.

A metered community will create a visible digital blueprint of the demand and supply data which would in turn affect the power sector analysis and reforms.

Unequivocally, metering the Nigeria population will increase quantity and quality of service delivery with more responsibility placed on service providers with a ripple effect on the Transmission and Generating companies. Increased demand has been seen to lower cost for customers and increased profit margin for producers, same as the communications industry in Nigeria. Apart from the fact that initial high tariffs were as a result of the Investment cost recovery, mobile communication is now cheaper because of the increased number of subscribers — My uncle bought his first SIM card for N34,000.

Wouldn’t the DisCos put pressure on Generating companies to generate more power? Wouldn’t GenCos be looking for innovative ways to generate more electricity? If for nothing but for the huge demand available and the huge profits to be made.

You… yes you. Thinking of how such a simple thing can affect a large industry like this? That is a valid question, and if you don’t agree with me, just think about it… what’s there to lose? Prepaid meters are not liabilities and there is no harm trying a simple solution like this when other big and complex solutions have failed in the past.

And if as an industrial expert or stakeholder, you’re thinking, “this guy doesn’t know what he is saying…things are not that simple”

Well, I am here to tell you that you are right but might be suffering from a bias: blind spot, ambiguity effect, the ostrich effect and the irrational escalation/escalation of commitment, basically all or either of the aforementioned.

Don’t continue to rationalize a previous decision and action by repeating it… (see what you made me do, you made me go all professional on you, when I was super friendly before…Smiles)

Prepaid meters are already in effect; we just need the whole of Nigeria to be metered.

We can now get prepaid meters by paying for it ourselves.

Let’s create the digital blueprint of our demand.

Go get your prepaid meter today.

[1] (https://www.nercng.org/index.php/home/nesi/403generation)

[2] (World Bank, United States census bureau)

[3] ownership (https://www.nercng.org)

[4] (Wednesday, September 26, 2018 / 08:47 AM / FDC Research)