Tinubu says power sector privatisation has failed, seeks N2trillion recapitalisation of distribution companies

President Bola Tinubu, on Monday, said Nigeria’s power sector privatisation had failed to meet its objectives, as the national grid was serving only about 15 per cent of the country’s electricity demand despite being privatised 10 years ago.

Tinubu, who spoke during the Nigeria Electricity Supply Industry market participants and stakeholder roundtable that focused on privatisation, also called for the recapitalisation of power distribution companies.

He said preliminary analysis showed that the Discos were currently under-capitalised to close to N2tn, adding that Nigeria’s power tariffs should be rebased.

Represented by the Special Adviser, Energy and Infrastructure, Office of the Vice President, Sodiq Wanka, the President said, “10 years on, I believe it is fair to say that the objectives of sector privatisation have, by and large, not been met. Over 90 million Nigerians lack access to electricity.

“The national grid only serves about 15 per cent of the country’s demand. This has left households and factories relying on expensive self-generation, which supplies 40 per cent of the country’s demand.

“What is worse is that the total amount of electricity that can be wheeled through the national grid has remained relatively flat in the last 10 years. The grid capacity has increased from just over 3,000MW to roughly 4,000MW today. Versus a 40,000MW target by 2020 that the Federal Government had set pre-privatisation.”

The President stated that the reasons for the sector’s underperformance in the last decade were well known, including deep commercial, governance and operational issues that had beleaguered the sector.

“As of Q2 2023, for every kWh (kilowatt-hour) of electricity sent to the grid, only 60 per cent is paid for. But as we know, even the tariff paid for that unit of electricity is far from being cost-reflective, especially in light of the recent devaluation of the naira.

“The sector has suffered chronic underinvestment, especially in transmission and distribution. Many of the successor utilities of the PHCN have failed to meet their performance improvement targets due to technical and financial capacity issues.

“We are in a vicious cycle of under-performance and under-investment, and everyone has a different view of which value chain player should be blamed for continued sector malaise.

“But we are where we are! And the real question we should ask ourselves in our engagements in the next three days is, how do we move forward from here?” Tinubu stated.

He noted that in the short term, stakeholders in the sector must intensify efforts to address commercial issues and improve the investment attractiveness of the sector.

He said the sector should have a clear plan to rebase tariffs to recognise the actual costs and loss levels of the entire value chain and allow for adequate investment cost recovery.

“We must be clear on shortfalls and how we will finance them. And there must be a clear path to extinguishing historic sector debts to various value chain stakeholders. A reconciliation exercise in this regard is already underway,” the President stated.

In terms of sector governance, Tinubu said it was vital to create an environment where the worst performers would not continue to drag the sector down.

“All licensees must have the technical capacity to deliver on their license and the financial muscle to invest and grow their operations. Preliminary analysis shows that DISCOS today are under-capitalised to the tune of close to N2tn.

“We must facilitate a reorganisation and a recapitalisation process that brings in new partners and new capital to jumpstart performance in this critical section of the value chain,” he stated.