Essay: The Evolution of Power Sector

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In order for us to come to terms with the importance of the power sector, we must trace its origins. The Holy Book of Christianity itself has this to say, “and God said, let there be light in the firmament of the heaven to divide the day from the night” (Genesis 1:4, The Holy Book, KJV). This goes to show that right from the origin of man, there has been a huge need for light and power.
When civilization had not reached its current state, man with ability (Homo habilis) used many natural materials such as sticks, leaves, woods, and so forth, in addition to stones to create fire and thus, the origin of light came into being as an inventive procedure. As man continued to progress, there was a paradigm shift in reasoning and man gradually moved towards the use of candles, lanterns, and other early sources of power. This again, was another step in power evolution.
With the need for industrialization which became more apparent by the day, many researchers and scientists decided to look at how a more sustainable source of power can be created and thus came the advent of electricity by Micheal Faraday. Later, there was a need to sell power. This was because industrialization had been rapidly coming to its apex. Two schools of thought concerning power were then developed.
The first school of thought was headed by the Serbian American scientist, Nicola Testa. He believed that electricity ought to be generated and distributed in form of an alternating current. An alternating current is that electric current that has both positive and negative cycles. The other school of thought was headed by Thomas Edison, the man who is credited with the highest number of inventions. He said that power (i.e, electric power) ought to be generated in form of a direct current, this he said was much safer to handle than alternating currents. With a higher potential might and standing than Testa, Edison won and America unanimously decided to use the direct current. Although, the issue of the use of either or both kinds of current has been nullified with the creation of the diode, a device which can convert an Alternating Current (AC) to Direct Current (DC), through a process known as rectification, while the inverter has been created to achieve the reverse process of moving from DC to AC.
Such is the power of electricity that in our world today, it would not be wrong to assert that a nations’ level of development is judged by its level of power generation and distribution. But why do we associate power generation with electricity. A simple scientific analysis would suffice here.
When we talk of power in an electrical sense, we are analysing a relationship between three key elements in electricity generation. They are the voltage, the current and the resistance. The combination of the three elements in various ways give us many equations of power. For example; Electrical power= current x current x resistance or Electrical power= current x volatage.
Power generation is thereby of utmost importance for any nation with aspirations of moving forward. Electrical power can be generated using many means such as air, water, and recently, nuclear forms of energy.
Unlike many other forms of scientifically generated ideas, power when generated cannot be stored, this is because science has not yet been able to design appropriate power banks to store megawatts of electricity energy. This means that as electrical power generation is being improved upon, there must be an attendant improve in distribution.
For any country to lay any sort of meaningful claim to being developed, then such a country must be able to have an uninterrupted power supply to its citizenry. This is sadly not the case of Nigerian citizens who have always been crying out for more supply of power. Power supply in Nigeria has been beyond epileptic. It has become a norm to see myriads of people, both adults and children jumping in celebration when there is supply of power to their homes. Shouts of NEPA! can be heard from many of such homes.
As earlier noted, issues concerning development revolve around power generation, allocation, distribution and utilization. That is why Wara, S.T., Abayomi-Alli, A., Umo, N.D., Oghogho, I. and Odikakor, C.D. (2009:) avers thus:
adequate power supply and distribution of electricity constitutes a central development issue which cannot be over emphasized. Apart from serving as the pillar of wealth creation in Nigeria, it is also the nucleus of operation and subsequently the ‘engine of growth’ for all sectors of the economy. In recognition of the consolidating linkages between the energy sector and other sectors of the economy, electricity development and utilization therefore have pervasive impacts on a range of socio economic activities and consequently, the living standards of citizens in the country.
It is in recognition of the above that the Federal Government of Nigeria has over the years made it a point of duty to focus a lot of time, personnel, revenue and expertise into the power sector. With the advent of democracy in the fourth republic, there was a higher need to radicalize the power industry by privatization.
The government viewed privatization as a salvation to the power sector because it probably believed that a private corporation would be less corrupt and more serious when it came to the issue of handling of the power sector. As steps in this direction, the government of the time engaged in two processes;
a) The guided privatization programme was designed and a regulatory framework was created to handle privatization modalities for the private sector to actively participate in, this led to a privatization of the National Electric Power Authority (NEPA).
b) There was also a reduction in tariff which favoured imported raw materials to be used in the power sector and thus, helping in the rehabilitation and resuscitation of infrastructural facilities to encourage increased capacity utilization and increased budgetary allocation (Ayodele, 2004).
Additionally, the government also handled the following reforms;
a) Before 1999, of the 79 generating station in the country, only 15 were functional, and that had a capacity of 1.520GW which had led to years of abysmal power performance in the power sector. Government looked at this and by 2003, the generated power had increased to 3GW.
b) The government set achievable target such as:
i. Generate 10GW of power by the end of 2007
ii. Increase and develop capacity to reliably transmit the increased power generated.
iii. Put in place a medium term investment plan to end by 2010
iv. Allow for more private sector participation and increase in efficiency
v. Exceed the Millennium Development Goals (MDGs) target of access to electricity (Wara et al., 2009).
A major energy product which has emerged from the development of Nigeria’s energy resources is electricity and the provision of regular, affordable and efficient electricity is crucial for the growth, prosperity, national security as well as the rapid industrialization of any society. One of the prominent infrastructure deficit gaps in Nigeria is in the area of power. At independence in 1960, the country inherited a rudimentary electric power generation and distribution system under the Electricity Corporation of Nigeria (ECN) and later changed to National Electric Power Authority (NEPA). Nigeria’s electric grid is being run on hydroelectric and thermal plants. The former are predominantly utilized in the northern part of Nigeria while the latter are fuelled by petroleum appear to be largely favoured in the Southern parts. The disadvantages of these approaches become evident in the harmattan seasons when the water level drops and in the chromic spate of fuel scarcity. Nigeria has about 5,900MW of installed electric generating capacity consisting of 3 hydro-based stations and 5 thermal power plants. Nigeria faces a serious energy crisis due to declining electricity generation from the power plants. Power outages are frequent and the power sector operates well below its capacity. NEPA is in charge of a sector which is grossly inefficient IseOlorunkanmi, O. J. (2014).
The electric power industry across the world is being deregulated at the wholesale price level. The policy change, in whatever form it finally takes, will have far-reaching impacts on electricity production and consumption by private and public utilities. Consumers and the environment will also be affected by deregulation. (Roger and David, 2002)
Energy is an important input to production. Therefore, without electricity mass production of goods becomes virtually impossible. While erratic supplies of electricity disrupt production, voltage fluctuations negatively affect the durability of machines. Better electricity-related infrastructure can, thus, raise the efficiency and durability of physical capital and economic development.
3.2. Nigeria’s History of Electricity Distribution
In 1898, electricity was born in Nigeria. This was the year that the first power plant was installed in Nigeria. It had a total capacity of 60KW. Later on, when the Northern and Southern protectorate became one, there was a distribution of power to other Nigerian towns such as: Port Harcourt 1928, Kaduna 1929, Enugu 1933, Maiduguri 1934, Yola 1937,Zaria 1938, Warri and Calabar 1939 (Claudius, 2014).
To this end, in 1946, the Nigerian Government Electricity undertaking was established under the jurisdiction of the public works department to take over the responsibility of electricity supply in Lagos. From 1898 when the first generating power plant was established in Lagos until 1950, the pattern of electricity department was in the form of individual electricity power undertaking scattered all over the towns (Ayobowale, 2011).
The government later set up a body which had to take over all that had to do with power supply all over the nation. This body was known as the Electricity Corporation of Nigeria (ECN). The new body started its job in April 1951, and its first task was to integrate the government and nature owned generating plant systems in one body. This action was able to improve the supply of power in the nation by a creation of generation, transmission and distribution system.
Before now, the electricity which was generated was sold in such a way that there was no room for adequate accountability. The ECN made sure that this was no more the case with a creation of a unified pursue. They also inaugurated many electrical projects at Oji River, Ijora, Kano, and Ibadan. This was done so that there would be a great increase in the availability and quality of power. To this end, a power station was opened up at Ijora and this helped to quicken the socio-economic transformation of the Western states of the country (Claudius, 2014).
Immediately after independence, the Nigerian parliament was set up. One of its major activity was to enact a law which created the Niger Dams Authority (NDA). NDA was responsible for all the dams that were being constructed in the country, notably the Kainji Dam project, which began in 1962 and ended in 1968. In 1961 as part of the ongoing power sector reforms, there was set up in the country the national grid of power transmission. This was a system mandated to link up all the states in the country.
The project effectively linked up Lagos, Kainji, Kaduna, Zaria and Kano in the Northern part of the country. In the Southern parts, we had Oshogbo, Benin, Ughelli, Onitisha, and Afam, all linked up. At present, the 36 states of the country including the Federal Capital Territory in Abuja are linked up (Claudius, 2014).
As part of developmental trends on the 1st of April 1972, the National Electric Power Authority (NEPA), was formed. This came about as a merger of the Electricity Corporation of Nigeria (ECN) and the Niger Dams Authority (NDA), on the 6th of January 1973 and at this point, the first manager was appointed. The national grid continued to increase in proportion, and between 1978 and 1983 after the government had laid out plans at restructuring NEPA into an independent unit or towards privatizing it. This was done by the establishing of electrification boards and their primary task was to take electricity from the major towns to new ones and villages (Okafor, 2008).
At the advent of the President Olusegun Obasanjo administration, the Power Holding Company of Nigeria (PHCN) was created as successor to the National Electric Power Authority (NEPA) wherein assets, and liabilities were transferred from the latter to the former. This was done officially on the 5th of May, 2015.
Before then in 2004, the federal government had inaugurated the National Integrated Power Projects (NIPP) and its aim was “to catalyse and fast track the upgrading and adding more capacity to the current available electricity capacity in the country”. This was basically a private initiative which is currently being supervised by the Niger Delta Power Holding Company (NDPHC) (Claudius, 2014).
3.3. Power Holding Company of Nigeria as at 2015
There is something unique about the power holding company as of today. That uniqueness stems from the fact that quite different from its three predecessors, ECN, PDA, and NEPA, it has different companies handling it in many part of the country. Below is a breakdown of how the company is now structured.
There are six generating companies currently in the country. They are:
a) Afam Power Plc: Afam power station has an installed capacity of 776MW, the plant was commissioned in phases. During the initial phase, 1962-1963, gas turbine units 1-4 were commissioned. During the second phase, 1976-1978, gas turbine units 5-12 were commissioned. Gas turbine units 13-18 were commissioned in 1982. Finally, two gas turbine units were added in 2001 during the final phase of the Afam Power Station extension (Folorunso, O. and Olowu, T., 2014).
b) Shororo Hydro Power PLC: Shororo power plant was commissioned in 1990; it has an installed capacity of 600mw and currently runs at full capacity, generating 2,100Gwh of electricity annually. It is Nigeria’s newest hydroelectric plant, this means it hosts Nigeria SCADA-operated national control centre. Shororo is also equipped switch yard facilities that includes a technical “step down” function for enhanced distribution into the national grid, and advanced control room and modern training facilities. Additionally, the plant is situated in the shororo gorge on the Kaduna River, approximately 60km from Minna, Capital of Niger state in close proximity to Abuja, Nigeria’s federal capital (Folorunso, O. and Olowu, T., 2014).
c) Ughelli Power Plc: Ughelli Power Plc operates a gas fired thermal plant located in the Niger Delta region. Ughelli power plant is one of the largest thermal generating power stations in Nigeria. The plant has a peak capacity of 972MW and generates about 2500GWh of electricity annually. The plant meets current world specifications for plants of its type and includes an updated control room, a switch gear room, a staff training school and recreational facilities. It is one of the earliest power stations as it began operating in 1966 (Iwin, 2014).
d) Kainji/ Jebba Hydro Electric Plc: This power plant operates as two hydro generation plants, with each drawing water from the River Niger. The combined installed capacity of the two plants is 1330MW, with Kainji alone generating 760MW and Jebba generating an effective output of 570MW. The plants generally operate at optimum capacity. Kainji began its operation as Nigeria’s first hydro power plant in 1968 while the Jebba plant was commissioned in 1985. Of the three operating power plants in Nigeria, Jebba is the smallest. Additionally, the plant is not just 100% generating, they have an on-site medical facility and a staff school, a recreational centre, and a training school. The two plants are operating at very good conditions (Nigerianewsdigest, 2015).
e) Sapele Power plant: This is a thermal power generation station situated in Nigeria’s Delta state. The state is rich in natural gas. The gas station has an installed capacity of 1020MW. The power plant has six 120MW steam engines/ turbines which generate about 2500GWh annually. The power plant has a peak capacity of 972MW. The plant is strategically located in the Niger Delta region, close to sources of both natural gas feed stock and a river for cooling its steam turbine generators. The power plant includes an updated control room, a switch gear room, a staff training school, as well as medical and recreational facilities. The station began its operation in 1978 (iwin, 2014).
f) Calabar Thermal Power Station: Calabar power station has an installed capacity of 6.6MW, derived from three units of 2.2MW each. Currently, it is supplying 4.4MW to the national grid and primarily serves as a booster to the power stations at Afam and Orji River. It was built in 1934 (Nigerianewsdigest, 2015).
In addition to the above mentioned six generating companies, there are also two generating companies which are currently not in full operation. They are;
a) Orji River Station: This is a thermal power station which was originally built to take advantage of plentiful nearby deposits of high grade coal. It generates 10MW of power from five coal-fired boilers and four steam turbines, originally installed in 1955. This plant is so far the only coal-fired steam power station in Nigeria. It uses water from the nearby Orji River to feed its steam turbines and also for cooling purposes (Energy fortress, 2015).
b) The Ijora Thermal Power Station: The Ijora power plant was commissioned in 1956 with coal fired boilers, although it is no longer operational. The plant has a 32/33 transmission station which is in good operating company, although its transformers are malfunctioning and needs replacement. Despite the fact that it is currently not in operation, the current demand for power and the availability of natural gas, plus the government’s programme for gas utilization bodes well for the station and gives it a certain competitive advantage (Energy fortress, 2015).
In addition to the generating companies, Nigeria currently has 11 distribution companies. These companies are situated at different locations all over the country. They are;
i. The Kaduna Electric Distribution Company Plc: This Company is also known as Kaduna Disco. ‘Disco’ is an abbreviation for Distribution Company. It is located in the North- Central region of Nigeria. The areas where its reach extends to include: Makera; Doka; Birnin- Kebbi; Gasau; Sokoto; Zaria.
The company owns about 37,33KV circuits, 107, 11KV circuits, and also has 79, 33/11KV substations as well as 2007 11/0.415KV distribution substations. In 2005, it recorded improved revenues as a result of its improved metering and billing. It also had improved tariffs, more distribution capacity, improved revenue collection (Energy council, 2011).
ii. Abuja Electricity Distribution Plc: This Company serves the central part of the country with a base in Abuja, the capital city of the Federal Capital Territory (FCT). It was established in 1997. Its areas of distribution include: Minna; Suleja; Lokoja; Lafia district
This company has a demand supply curve as its mostly finding it difficult to cope with the vast supply needs it is facing. It distributes about 150MW of electricity annually, and has been ranked a position of fourth among the four distribution companies in the country in terms of sales and electricity distributed. It has one of the best and modern infrastructure. The company owns and maintains 60, 15MVA injection substations, 11, 7.5MVA and 35, 2.5 MVA injection substations respectively (Energy council, 2011).
iii. Jos Electricity Distribution Plc: It is located along the North Eastern parts of the country and serves such places such as: Jos; Markurdi; Bauchi; Gombe.
The town of Jos is reputed to be the centre of the country’s minning industry. This company covers more than 610,000sqkm, with a population of more than 13 million people within its reach. The company owns and maintains 31,33KV and 104,11KV circuits, these circuits cover a distance of 4,540.56 and 898.609 kilometers respectively. It has 4339, 11/0.415KV network circuits and has a 7,066 kilometer long 0.415KV circuits. The company’s revenue is believed to have the possibility of increasing by 80% within the next few years. This is as a result of the new distribution capacity, improved tariffs, new metering and billing efficiencies, improved collection and a growing customer base (Iwin, 2014).
iv. Kano Electricity Distribution Company Plc: This company is located in the North Western Nigeria and it distributes to the following states: Kano; Kastina; Jigawa.
It owns and maintains 37,33KV and 10711KV circuits and covers 4,145.69 and 2,1829.95 kilometres along these circuits. It has 79.35/11KV injection substation and 2,007, 11/0.415KV distribution substations. On its own, it distributes about 14% of the total energy in the Nigerian energy sector. In 2005 alone, it distributed a total of 1,228,710,220 GWh of electricity to 286,622 residents, commercial and business users. By 2008, its customer base had become 489,965 (Nigeriapowerreform, 2010).
v. Yola Electricity Distribution Plc: It distributes to the North Eastern part of Nigeria, comprising the following states: Adamawa; Gombe; Taraba; Yobe.
It owns 22,33KV and 59,11KV circuits. These circuits cover 3190.23 and 866.93 kilometres respectively. It has 43,331/1KV injection substations, 999,11/0.415KV distribution substations. Because of its proximity to Cameroon, Chad and Niger, it suggest international electricity exportation in the future (Iwin, 2014).
vi. Enugu Electricity Distribution Plc: This is located in the South Eastern region and covers states like: Abia; Anambra; Ebonyi; Enugu; Imo.
This is so important because it supplies Aba and Onitsha, two major towns in Abia and Anambra, who are the major economic centres in the country. It is the second largest distribution in terms of customer base and the fifth in terms of electricity sales. Of recent, it has been increasing its monthly collection by about 32%, over 3 years. It also put in place operational improvements which have led to a 52% increase in its bulk distribution capacity increasing from 467.25MVA to 710.75MVA (Nigeriapowerreform, 2010).
vii. Benin Electricity Distribution Company: Its customer base spans some part of the Southern region. Region spanning states such as: Delta; Ebonyi; Enugu; Imo.
It owns and maintains 39,33KV and 200, 11KV circuits, covering 4,999.391 and 5,7085 kilometres respectively. It also operates 153, 33/ 11KV injection substations and 124, 6.6/0.415KV distribution substations. It also owns and maintains 7, 6.6KV circuits and has 92.14 kilometres of 6.6/ 3.3KV circuits. It also has a customer base of 529,341 as far back as 2008 (Nigeriapowerreform, 2010).
viii. Eko Electricity Distribution Company Plc: this company is located in the financial capital of Nigeria which is Lagos. It supplies Lagos South including the following places: Festac; Lagos Island; Ajah; Agbara/ Badagry district.
The company also has the potential to supply the republic of Benin. It has 51, 33KV and 217, 11KV circuits covering 508 and 2,137.95 kilometres respectively. It also has 48, 33/ 11KV injection substations and also 4,019, 116/ 0.415KV distribution substations (Folorunso, O. and Olowu, T., 2014).
ix. Ikeja Electricity Distribution Company Plc: This company is also located in Lagos and distributes to parts of the following: Lagos city; Shomolu; Alimosho; Ojodu; Ikorodu; Oshodi; Abule-Egba.
The company in 2005, delivered 3,520,324,31GWh of electricity to 464,756 registered customers (Folorunso, O. and Olowu, T., 2014).
x. Ibadan Electricity Distribution Company Plc: It distributes and markets electricity in parts of the following states like: Ogun; Osun; Kwara.
It is divided into eight districts, namely, Abeokuta, Dugbe, Molete, Ijebu –Ode, Osogbo, Ilorin, Sango-Ota and Oyo. It maintains 65, 33KV and 155, 11KV circuits. It covers 4,154 and 14,760.58 kilometres over the two circuits. It also operates 122, 33/ 11KV injection substations, 3,431, 116/.415KV distribution substations and 9,095, 0.415KV network circuits covering 12,315 kilometres with a customer base of 812,000 people (Energy council, 2011).
xi. Port Harcourt Electricity Distribution Company Plc: This Company serves Bayelsa, Cross River, Akwa Ibom, and parts of Delta state in South- Southern Nigeria. It is divided into six districts namely: Calabar; Diobu; Ikom/ Ogoja; Borikori; Uyo; Venegoa.
It owns and distributes 22,33KV and 64, 11KV circuits. It also operates 22, 33/11KV injection substations and 3,431,116/ 0.415KV distribution substations. It also possesses 1,793 11/0.415KV substations, and 5,662, 0.415KV circuits. In 2005 alone, it delivered 1,163,064, 600GWh of electricity to 206,545 customers. By 2008, however, its customer base had become 347, 789 (Nigeriapowerreform, 2010).
The PHCN also has one transmission company, the Transmission Company of Nigeria. It manages the nation’s power grid. Its responsibilities include; system planning, engineering, operation, maintenance, procurement, and management to support the nation’s transmission network. The company is divided into five zones which aids its operation and management. The five zones have a unified national system of control at Oshogbo and a supplementary centre at Shororo. Its management network is further comprised of six regional offices and several satellite work centres (Folorunso, O. and Olowu, T., 2014).
3.4 Electricity Sector Reforms
To reform means to change a system, law, organization. It also means to start to exist again or to bring something into existence what had been dead. The above two definitions can aptly define what has happened in the Nigerian power sector. The following are a few noticeable reforms in the Nigeria power sector:
3.4.1 Privatization
The biggest thing that the then President, Olusegun Obasanjo did for the Nigerian economic sector was to privatize many public facilities. One of such was the power sector. Before the inception of that very administration, the power sector was government owned. The government invited private investors into the power sector and it has never been the same after that.
3.4.2 National Electric Power Policy
This policy was to revolutionize the power sector. Its objectives includes:
a) To ensure that the power sector attracts private investment both from Nigeria and from overseas.
b) To develop a transport and effective regulatory framework for the power sector.
c) To develop and enhance indigenous capacity in the electric power sector technology.
d) To ensure that the government diverts its interest in state owned entities and entrenches the key principles of restructuring and divestiture in the electric power sector.
e) To promote competition to meet growing demand through the full liberalization of the electricity market.
f) To review and update electricity laws in conformity with the need to introduce private sector operation and competition into the sector (EPSR, 2005).
This resulted in the following:
a) The creation of the Power Holding Company of Nigeria (PHCN) to assume the liabilities and employees of NEPA.
b) The breaking up of PHCN into eight different companies.
c) The establishment of the Nigerian Electricity Regulatory Commission (NERC).
3.4.4 Unbundling PHCN
The unbundling process has helped the power sector grow drastically. The process helped in enhancing uninterrupted power supply: By uninterrupted, we mean a situation where the power supply is stable. Previously, we had a situation where power was constantly going off. With uninterrupted power supply, many businesses have been able to grow and sustainable improvements have been carried out. The economy has greatly improved as a result of this. The power sector reforms came handy as the unbundling process grew.
3.5. Issues and Challenges of Power Holding Company of Nigeria
Despite the privatization of PHCN in 2013, Nigeria’s electricity generation capacity has declined from the peak generation level of about 4,517.6 mega- watts (MW) recorded in December, 2012 to about 3,670 MW in January, 2014.The electricity generation forecast was 12,800 MW of electricity, energy generation capacity 3,670 MW hour per hour (MWH/H), while actual electricity sent out into the national grid was 3,585.32 MWH/H (Joseph, I. (2014).
According to the recent poll by NOIPolls Limited, electricity supply in Nigeria worsened in the fourth quarter (Q4) of 2013, at the peak of the privatization process. According to the report, although power supply to households worsened in Q4, nevertheless, majority of Nigerians (70 percent) were hopeful about the ongoing reform in the power sector. The report indicated that an average of 46 percent of Nigerians received between 1-4 hours of continuous power supply daily, while 17 percent said they have received absolutely “No Light” in their households. The Poll however, noted that in Q4, the Nigerian power sector saw an achievement of a milestone as the privatization process, initiated to reform the power sector was taken to the next level. The Transmission Company of Nigeria is also facing initial challenge of fund as it requires about $4.4billion to increase power transfer capacity, make the network more stable and reliable, and improve efficiency of electric power transfer by reducing transmission technical losses and enable TCN to increase transmission capacity to 16843 MW by end of 2018 (Obasi and Ayansina, 2014).
The power sector reform is anchored on the use of gas to power systems in order to meet the needs of the country. The availability of gas to ensure consistency in power supply has been a great challenge. This challenge is a result of the inadequate infrastructure needed for gas gathering, processing and transportation. The negative effects of saboteurs and vandals in gas production affect the availability of gas. Gas supply to the power plants was not taken into consideration that this will affect the operation of the power .For instance approval for the construction of some plants like the Alaoji 1074 mega- watts (MW), Egbema 338MW, Geregu 848MW and Omotosho 786MW gas turbines by the Obasanjo’s administration did not factor in, the issue of gas supply to these plants. The resultant effect is that these plants has remained unutilized long after they were commissioned (Joseph, I. (2014).
There are many fraudulent practices by many electricity consumers that were ignored by the former PHCN either due to lack of information or with the active connivance of dubious staff of the organization. These fraudulent activities reduced the income generation of the former PHCN. If left unchecked, it will hinder revenue of the new owners of the privatized PHCN. These offences were committed when consumers and utility staff resort to unlawful direct hooking from line; bypassing energy meter; injecting foreign elements into the energy meter; drilling holes in electro-mechanical meter; or assigning illegal amount of energy units to consumers.
The unbundled PHCN was poorly managed which was one of the reasons why it could not sustain itself by generating enough revenue to remain in operation. Therefore there is the challenge of not having comprehensive information detailing the assets and liabilities of the erstwhile PHCN. In a bid to solve this issue the Federal Government set the Nigerian Electricity Management Company (NELMCO).It is serve as a government Special Purpose Vehicle based on the understanding that it would assume and manage extant assets, liabilities and other obligations that could not be easily transferred from PHCN to the Successor Companies. There would likely be arising conflicting interest between the new investors and the government over the quality of assets that were privatized as the assets will require additional huge investment to upgrade the assets to standard that will ensure smooth running of the equipment. Government as equity shareholder may be unwilling to commit substantial amount to such investments
The former employees of PHCN like every employee of privatized companies elsewhere have been averse to the privatization of the sector. The fear of the future of their employment created the initial resistance to the unbundling process. Some of their initial concerns that bother on arrears in salaries, pensions, severance and other benefits owed to them had been taken care of. What could pose further challenge are issues hinging on the criteria to be adopted in choosing those to be retained and those to be laid off. This becomes an issue when most of them were retained to keep the business going even when their severance allowances had been paid with the hope that they will be reabsorbed. This might create room for sabotage from disappointed staff.
The power sector is a highly capital intensive industry. Many of the investors that acquired the unbundled PHCN borrowed money from banks and having acquired these loans from these banks, continuous financing of the projects will become a herculean task. Nigerian banks provided 70 per cent of the funds in loans and equity of the N404bn paid for the power assets. The acquired loans and Federal government intervention funds disbursed through Money Deposit Banks will not be sufficient to fast track the rapid turn- around expected in the sector. Further challenge is that the estimated $4.28bn required capital expenditure and rehabilitation expenditure which is hoped to be provided by indigenous banks (Punch, 2013).Having acquired PHCN subsidiaries, The Bureau of Public Enterprises Director General declared that the distribution companies (Discos) would be required to spend a total of $357.7m in 2013 alone. Of the $357.7m, the Abuja Disco would be expected to invest $36.6m; Benin, $24.3m; Enugu, $27.2m; Ibadan, $43.86m; Jos, $22.75m; Kaduna, $29.96m; and Kano, $30. 38m. Others are the Eko Disco, $45.2m; Ikeja, $58.74m; Port Harcourt, $25.5m; and Yola, $13m. The expected spending by Discos is to cover the following areas: metering, health, safety and environmental practices, reduction in the number of customer interruptions due to network faults, new customer connections and network expansion, improving customer services and complaints handling procedures. Some of the successful bidders have not completed the payments as many of them still owe the federal government. According to the Nigerian Electricity Regulatory Commission, of the 11 electricity distribution companies in the country, only three have so far remitted to the Federal Government money due it (Nnodim, 2014).
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