Electricity improvement in Nigeria: Leveraging Telecommunication industry growth model

The rise of mobile telecommunications in Nigeria is a perfect example of organic growth and prosperity. Two telecom carriers, Airtel and MTN, are among the most valued corporations in Nigeria. Since the sector's emancipation in Nigeria in 2001, the market value of these utility companies has risen to more than 1 trillion Naira.

What can Nigeria’s electricity sector learn from its telecom counterpart? Investigating how Nigeria's power value chain can benefit from the development playbook of the country's telecom industry will be of immense service to the sector.

The telecommunication industry expansion has occurred while Nigeria's electricity supply continues to deteriorate despite numerous interventions. How did the telecommunications industry acquire almost 200 million subscribers in two decades while power accessibility in Nigeria remains at 48% after more than a century? How could the telecom sector develop a fibre network spanning more than 50,000 kilometres, yet our power transmission and distribution network hardly expanded? How did the industry achieve a 250%+ rise in subscribers in just ten years? How might revenue collection strategies used in the telecommunications business be adapted to the energy sector? How did the telecommunications business derisk and attract over $70 billion in private sector investment in the last 20 years while the electricity sector struggles to finance needed infrastructure?

These are questions in my mind. While the value chain for telecommunications and electricity are agreeably distinct, I believe that there are similarities and instances where best practices can be exchanged, and strategies can be combined.

Factors Influencing Telecom Success

100% private sector-driven - Nigeria’s telecommunications sector is thriving, in my opinion, because it is entirely driven by the private sector, with the government serving as a regulator through the Nigeria Communications Commission (NCC). The sole government-owned telco perished. This is another justification for the government to exit the electricity value chain. Institutional bureaucracy and poor public sector culture have made state-run establishments a failure. ?

Regulation - The NCC is one of Nigeria's finest government regulatory organizations, providing the telcos with the necessary regulation, driving the sector's strategic growth, and ensuring all KPIs are met. The Nigerian Electricity Regulatory Commission (NERC) should study some of NCC's operating procedures. The NERC has not been successful in fulfilling its oversight and enforcement responsibilities in the Nigerian electricity industry.

Competition - In Nigeria, there is unparalleled competition between the telcos. First and significant pricing, services, and choice were all transformed by Globacom's entry into the market in 2003. This accelerated the adoption of the service and penetration of telecommunication services. The jostle for customers puts TELCOs on their toes regarding accessibility, pricing, discounts, marketing and services. In the electricity industry, this is typically no competition parse. Because there is no competition, the motivation and urge for ambitious continuous improvement are absent, leaving the customer with subpar customer service, especially in an environment where regulatory functions are poor.

Global brands with local players - The players in Nigeria's telecommunication industry are dominated by international brands but with a local presence. The Nigerian entities could leverage their parent company's technical knowledge, experience and financial muscle for accelerated growth and continuous improvement. MTN Nigeria leverages MTN SA, Etisalat leveraged the parent company in the Middle East, and Airtel Nigeria leverages Bharti Airtel global resources. This is the same for the likes of CELTEL and ECONET. In addition, these brands invested heavily in local resources for management, engineering, services and logistics, a feat that is found wanting in the electricity value chain. The Nigerian electricity value chain does not have this type of framework. The players are primarily Nigerian organizations that develop organically utilizing resources from old NEPA and some OEMs. This is not a flawed framework, but this can slow the pace of innovation and development in the electricity sector.

Aggregated system ownership - Telcos operate on a wing-to-wing basis. Each service provider owns the complete system, including "generation, transmission, distribution, invoicing, and operations" (Operator). As a result, the telecom has total control of its infrastructure, data and cash flow and can continuously enhance them. However, the electricity value chain depends on each sector member to ensure service delivery. The industry and stakeholders are at the mercy of the system's weakest link. It may be time for a new electricity value chain model where an investor owns the whole value chain: Generation, transmission, distribution, billing, negotiates its gas contracts, pricing and PPA.

Innovation - Telcos produce innovative products. They are well-positioned for continuous growth thanks to their branding, product deployment, and strategic systems like payment. Telcos in Nigeria (like in many developing nations) jettisoned the common fixed-rate monthly billing in the global north in favour of “recharge cards” to allow for affordability. The strategy for service delivery in the electricity industry has not changed for decades, and this is an area for improvement for the sectorial transformation. What other efficient means for grid capacity improvement can be explored? Can the private sector develop a wing-to-wing approach to the electricity chain? Can utilities band together and develop their payment system? Can the discos lead the development and manufacturing of meters in Nigeria for efficient billing?

I wish to see electricity companies like Transcorp Power, Geometric Power, Century Power, Pacific Energy, Genesis, Sahara, Ibom Power, EKEDC, AEDC, Kaduna Electric, PHEDC etc. dominate the Nigeria Stock Exchange. Institutional frictions must be alleviated, technical and commercial risks need to be mitigated and socioeconomic deterioration must be addressed for this to occur.

The study of the African telecommunication companies’ growth playbook and its application to the power industry is worthwhile and relevant, particularly in Nigeria.