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The Nigerian Power Sector Reforms: Overcoming Post-Privatization Challenges

Thus, it was not surprising that with the advent of democratic rule in 1999, the drive for a more efficient electric power sector intensified. To achieve the desired goal of an improved electric power sector through reforms, the Bureau of Public Enterprises (BPE), which replaced the defunct Technical Committee on Privatization and Commercialization (TCPC), was established at the same time as the National Council on Privatization (NCP). One year after, the Federal Government of Nigeria inaugurated the Electric Power Implementation Committee (EPIC). The EPIC drafted the National Electric Power Policy (NEPP) in 2001, which was the precursor of the Electric Power Sector Reform Act (the “EPSR Act”) enacted in 2005.

The EPSR Act set the pace for power privatization in Nigeria and the resultant incorporation of the Power Holding Company of Nigeria Plc (PHCN), which was the initial holding company that assumed the assets, liabilities and employees of the defunct NEPA. Subsequently, 18 successor companies were hived off the PHCN and on 1st November 2013, 15 of the successor generation and distribution companies were successfully handed over to new owners.

As the Federal Government took decisive steps towards divesting from the power sector, Nigerians became hopeful and in turn, these steps encouraged public private partnership (PPP) which then further deepened the reforms. Government’s issuance in 2010 of the Presidential Power Road Map provided the much needed boost to public confidence in the on-going process.

Though the privatization exercise was largely successful, profound challenges remain, which dampened the wide-spread expectation that the privatization of NEPA would bring an end to the incessant power outages in Nigeria.

Initial Challenges that dogged the Privatization Process

Many international investors were initially skeptical about participating in the power sector privatization because of the history of inefficiency and endemic corruption. Indeed, reputable international power companies, who possessed the requisite expertise and experience, declined any participation in bidding for any of the generation and distribution businesses. These international investors expressed genuine concerns, about the issues of transparency and sincerity on the part of Federal Government. Thus, only very few investors, who really understood the intricacies of the sector, participated in the privatization and fewer still, took over the control and management of the successor generation and distribution companies.

Interestingly, international investors who braved the daunting and seemingly bleak Nigerian power sector by electing to participate in the bidding process, almost lost the appetite to continue as they found the dearth of vital information rather frustrating. The insufficiency of information stalled their ability to conduct deep and conclusive feasibility and viability studies. Specifically, prospective investors had difficulty conducting technical, commercial and legal due diligence in order to properly evaluate the assets, determine their true value and the precise state of affairs. Labour unions, in defence of their members in the sector, frantically denied bidders, the opportunity of inspecting the books and facilities of the unbundled PHCN.