AN EVALUATION OF THE ECONOMIC IMPACT OF POWER SECTOR PRIVATIZATION AND ELECTRICITY DISTRIBUTION IN NIGERIA

CHAPTER ONE INTRODUCTION 1.1 Background to the Study The development, prosperity, and security of any nation, along with its pace of industrial growth, are strongly dependent on the availability, efficiency, and reliability of its electricity supply. It is widely recognized that no country aspiring for progress can afford to overlook its power sector. In Nigeria, the inadequacy of electricity generation and distribution stands out as a major infrastructural challenge. Due to the unpredictable nature of Nigeria’s electricity supply, the country is often referred to as a “generator economy” (Ekpo, 2019). Reports from the National Association of Small Scale Industries (NASSI) and the Manufacturers Association of Nigeria (MAN) suggest that their members spend roughly N2 billion (about $12 million) weekly on alternative power sources (Anyanrouh, 2017). Findings from NOI Polls Ltd in the second quarter of 2013 indicated that out of 160 million Nigerians, around 130 million—roughly 81%—relied on self-generated electricity to offset the unstable national supply. Furthermore, 110 million Nigerians were reported to spend significantly on alternative energy sources (Anyanrouh, 2017). Dr. Kabir Usman of the Centre for Management Development highlighted that 60 million Nigerians collectively spend about N1.6 trillion annually on generators (Obasi, 2013). The persistent power shortage stems from power plants’ inability to match increasing electricity demand. Key contributors to this deficit include aged infrastructure—36% of plants are over 20 years old, 48% are older than 15 years, and 80% exceed 10 years of operation (Adenikinju, 2019)—poor maintenance, and ineffective management. Nigeria’s total electricity production is about 3,800 Megawatts, with an annual per capita energy consumption of just 136 Kilowatt-Hours. Compared to Libya (4,270 KWH), India (616 KWH), China (2,944 KWH), South Africa (4,803 KWH), Singapore (8,307 KWH), and the USA (13,394 KWH), Nigeria’s per capita consumption is one of the lowest globally (Idowu, 2020). This study, therefore, seeks to assess the economic consequences of privatizing Nigeria’s electricity sector and its effect on power supply. 1.2 Statement of the Problem The Federal Republic of Nigeria (2020) notes that most electricity infrastructure dates back to the 1970s and 1980s. Since then, poor-quality and limited electricity supply has negatively impacted national development. Currently, the country faces an acute energy crisis, largely because of reduced output from aging, inefficient, and poorly maintained domestic power plants—a result of weak maintenance culture and public sector inefficiency (Ikeme & Ebohon, 2015). Privatization emerged as a global strategy to enhance the performance, efficiency, and profitability of state-owned enterprises. According to Laleye (2021), one major goal of privatization is to gradually transfer public services and enterprises—particularly those more suited for private sector management—to private hands. As part of this reform effort, the Electric Power Sector Reform (EPSR) Act was enacted in 2005, leading to the privatization of Nigeria's power generation and distribution from November 2013. Despite this transition, stable and reliable electricity remains elusive. Nigerians still grapple with frequent blackouts. As Makoju (2019) observes, Nigeria has failed to provide adequate and affordable electricity to its growing population despite having abundant energy resources. This study will therefore explore the economic outcomes of power sector privatization and electricity supply in Nigeria. 1.3 Objectives of the Study The main objective of this study is to investigate the economic impact of the privatization of Nigeria’s power sector and electricity provision. Specifically, it aims to: i. Assess the effects of Nigeria’s privatization program. ii. Identify obstacles faced by privatized firms in providing stable electricity. iii. Examine the broader economic consequences of power sector privatization. iv. Recommend ways to improve electricity supply in the country. 1.4 Research Questions The study seeks to answer the following questions: i. What are the effects of Nigeria’s privatization program? ii. What challenges do privatized firms encounter in delivering stable electricity? iii. What are the economic implications of privatizing the power sector? iv. What strategies can be recommended to enhance electricity supply? 1.5 Research Hypotheses The study tests the following hypotheses: H0: Privatization of the power sector has no economic implications for Nigeria. HA: Privatization of the power sector has significant economic implications for Nigeria. 1.6 Significance of the Study This research will benefit several key stakeholders. It will serve as a practical guide for the Bureau of Public Enterprises (BPE), which oversees privatization across various sectors of the Nigerian economy. Insights from the study can help the BPE adjust and refine its approach to power sector reform. Furthermore, the Nigerian Electricity Regulatory Commission (NERC), Generation Companies (GENCOs), and Distribution Companies (DISCOs) will also find the findings useful. The study could assist in tackling key challenges facing Nigeria’s power sector reform, thereby improving service delivery and boosting the economy. 1.7 Scope of the Study This study will evaluate the effects of Nigeria’s privatization efforts in the power sector. It will examine the challenges faced by privatized companies in ensuring reliable electricity supply, assess the economic impact of privatization, and propose solutions for improving electricity distribution across the country. 1.8 Limitation of the Study As with any academic work, a few challenges were encountered. Limited financial resources affected the researcher’s ability to access relevant literature and conduct data collection through surveys and interviews. This constraint influenced the sample size used. Additionally, the researcher had to balance this study with other academic commitments, which reduced the time available for in-depth research. 1.9 Definition of Terms Economic: Pertaining to the economy or financial aspects of a system. Privatization: The shift of business or services from public ownership and control to private entities. Power Sector: Industries and services involved in the production, distribution, and sale of electricity. Electricity Supply: The total energy, including capacity and services, provided to consumers through the national grid or alternative means.