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News - September 27, 2022

Why Privatising the Transmission Company of Nigeria Could be a Big Mistake

With the unresolved matters between the federal government and the National Union of Electricity Employees (NUEE), the government is taking steps toward privatising the Transmission Company of Nigeria (TCN). As a result, the workers threaten to embark on a nationwide strike.

Dukat Ayuba, the Zonal Organising Secretary, North-West, NUEE, said that though the two parties are still deliberating, the group would embark on the strike. He also describes the attempt of the government to sell TCN and privatise the sector as fraudulent.

He said, “That was why we kicked against privatising the distribution sector because the investors don’t have the capacity and expertise. As committed Nigerians, we advised the government against it. But the government was hellbent on doing so.”

Despite privatising the power sector in 2013, it still uses outdated equipment from 40 to 50 years back. This, in turn, has gradually reduced the hope and expectations of people to nothingness.

The journey so far in the privatisation of the electricity sector

In 2013, Nigeria’s federal government privatised the country’s power sector. This was due to the drop in generation to as low as 2,500 megawatts, the frequent system collapses, low levels of investment in repairs, maintenance and human resources development, the issues of inefficiency in terms of revenue collection and high energy losses.

This trajectory was, however, seen as a miscalculation on the part of the government. Sam Amadi, the former Chairman of the Nigerian Electricity Regulatory Commission (NERC), believes that using short-term capital to solve a long-term project momentarily was the distribution company’s (Discos) first step on the wrong path.

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He pointed out that most investors that acquired the power sector assets might be unable to sustain them as the capitals were loans from commercial banks on a short-term basis. Instead, he believes the government should have fully commercialised and corporatised the sector under effective regulation as the country is still struggling with electricity scarcity.

He said, “ This is a singular mistake Nigeria made. We should have fully commercialised and corporatised our electricity sector under effective regulation. Privatisation would have come down the line when the sector gained efficiency through effective regulation and good corporate governance. We erred by privatising so quickly when we were yet to set up a proper corporate governance regime and when we suffer from gross incapacity.”

Though the government eventually sold the assets and generated $2 billion from the unbundling of some assets, the intended projects the revenue was meant for remain a mirage today. 

Nigeria moves towards total removal of energy subsidy

In 2021, the Federal government put in place plans to sell the remaining assets in the power sector to complete the privatisation process. This aimed at privatising the Transmission Company of Nigeria (TCN), which will stop existing subsidies such as tariff shortfall in the Nigeria Electricity Liability Management Company (NEMLCO). 

This was made known by the Bureau of Public Enterprises (BPE), the government body overseeing privatisation. Though details are still unknown, the unbundling of TCN and eventual sale will be between January 2021 and November 2022.

In August 2022, Alex Okoh,  the Director General of the Bureau of Public Enterprises (BPE), said that TCN is to be unbundled into several companies for better efficiency. He made this known while receiving delegates from Jindal Steel & Power Group, an Indian mines and steel firm.

Though the BPE and government aim to achieve better power supply in Nigeria, is complete privatisation the step on the right path?

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