Nigeria plans franchises for community electricity

The Nigerian government says it is planning to allow power companies, known as DisCos, to sell rights to smaller firms in their operational areas to supply electricity to local communities.

The franchising model is one of multiple policy options being considered to address Nigeria’s long-standing issues with electricity access, power minister Adebayo Adelabu said Monday.

The government would “unbundle” the DisCos along state lines for efficiency, and sell off those still owing banks.

“They are too big for effectiveness. Ibadan DisCo covers seven states. It is practically impossible for them to be efficient,” the minister told the Senate committee on power on Monday, according to Premium Times.

“So we are rearranging and restructuring the DisCos along state lines so that each state government will know the responsible DisCo for their states,” he said.

The government sees franchising as a potential solution for serving smaller communities.

“The fact you are an Eko DisCo doesn’t mean that you cannot have smaller DisCos that are ready to invest in your unserved communities. So we are looking at franchising,” he said.

Behind the story

• • • Nigeria has grappled with a notoriously unreliable power sector for decades. Despite boasting vast energy resources, the country suffers from frequent blackouts and insufficient electricity generation, crippling businesses and hindering development.
    • Businesses struggle to operate efficiently, hindering economic growth and job creation, and frequent blackouts disrupt daily life.
    • Despite numerous government initiatives and promises of improvement, the power sector continues to disappoint. The has situation hasn’t improved years after the government sold 11 power companies to private owners in 2013. Average generation level stands at about 4000 megawatts.

Sell-offs!

The minister, who is less than a year on the job, said the sector has performed poorly because those who bought the electricity distribution companies from the government “messed them up.”

He said the government, which retained 40% stake in the companies, will in the next three months sell DisCos that could not pay back the loans they took from banks.

Five companies are currently run by banks and the Asset Management Corporation of Nigeria due to their failure to repay loans to financial institutions.

The Abuja Distribution Company is managed by UBA, while Fidelity Bank runs the Benin, Kaduna, and Kano DisCos. The Ibadan DisCo is under the management of AMCON.

“We can no longer afford AMCON to run our DisCos. We can no longer afford the banks to run our DisCos. This is a technical industry, and it must be run by technical experts,” the minister said.

Unfinished projects

Mr Adelabu said Nigeria has more than 65 electricity transmission projects that have yet to be completed 23 years after they were initiated.

The power substation projects were initiated in 2001 during the Obasanjo administration and till date have remained uncompleted. More than 40 other projects started by other governments are also not ready several years after.

“Since 2001 till date we have over 100 uncompleted projects of the Transmission Company of Nigeria. So when we say the government has spent so much in the sector, it is true. But all the spending has not translated to a good impact on power users,” he said.

“This is because the majority of these projects have not been completed, though some of them are 80 or 90 per cent completed.”

He said, “We have over 65 projects on power substations that are still ongoing since 2001, which was 23 years ago. We have about 62 lines of projects across the country that were started and have not been completed.”