Interview: Babatunde Fashola
What effect has privatisation had on the sector?
BABATUNDE FASHOLA: It is important to understand why reforms to the power sector were initially necessary in Nigeria. For many years, with the exception of a few gas-to-power initiatives with international energy companies, the federal government was the sole provider of electricity; it managed the generation, transmission and distribution of power. The people of Nigeria deemed that the government was not managing the power industry efficiently enough, and believed the private sector could do so more effectively. In 2005 our elected representatives passed the Electric Power Sector Reform Act, which set reform in motion.
By November 2013 the privatisation process had been completed under the previous administration’s watch, and resulted in the sale of 17 companies, comprised of six generation companies and 11 distribution companies. These were sold to private organisations, with government retaining certain levels of equity and ownership. The transmission network, however, remains in government hands.
Despite having run into some challenges, I believe these reforms will be successful in the long run. We believe that markets are best at allocating capital where it is needed, and the role of the Federal Ministry of Power, Works and Housing (MoPWH) is to support the flow of funds and private human capital by creating an enabling environment in which power generating companies and distribution companies are able to flourish.
What are the challenges to reaching the MoPWH’s targets for increasing power generation?
FASHOLA: There are a number of challenges for increasing power generation in Nigeria, particularly in gas supply. A major obstacle is the need for the construction of additional gas infrastructure, such as pipelines, as attacks on these infrastructure negatively impact power supply. These are capital-intensive projects that take some time to build. Pipeline vandalism is also a concern, as attacks on these key infrastructure elements negatively impact power supply. Local communities can play a central role in this regard by protecting vital power assets which benefit everyone.
The maintenance of power plants is another important issue. Many power generation facilities and transformers are quite old and, until equipment is refurbished, changed or upgraded, the country will continue to have an erratic power supply.
Which specific measures are being used to improve power provision in rural areas?
FASHOLA: The proximity of power generating facilities to their fuel source is a critical issue for electricity provision in rural areas. If the distance between a generation plant and the origin of its fuel is great, the electricity production costs will grow. To tackle this issue, it is important for Nigeria to have an adequate energy mix that focuses on the optimal use of multiple sources of fuel, such as gas, hydro, coal, solar and biomass.
Different regions of the country should focus on developing power in a way that makes sense given the type of fuel that is nearby. The northern regions of Nigeria have a high level of irradiation and are thus ideal for solar power. We intend to support northern states into becoming Nigeria’s solar hub. The Middle Belt and north-central areas of the country are well positioned to use coal as their primary source of fuel for power plants. Nigeria’s southern regions should have their power generated by gas, given their proximity to the country’s natural gas reserves. We have already issued the energy mix policy document, which will enable investors to identify the types of energy projects that are suitable for each region of Nigeria.
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