Nigeria Power Sector Reform; Good or Bad?

Developing countries in Africa adopted three types of reforms. Nigeria adopted the?vertically unbundled?reform. In other words, Nigeria 'unbundled their power sector'. They separated generation from the grid and left an independent grid that can contract both state generation and private generation. Nigeria allowed for the both state and private generation activities, which fostered the collaboration with private generators (mostly independent power producers) - to generate and distribute electricity across its 36 states.?

It all?began when major issues within the Nigerian power sector, principally concerning?power outages?and?unreliable service, compelled the Nigerian government to take radical action. It then enacted the Electric Power Sector Reform Act of 2005, which called for the vertical unbundling of the Nigeria Electric Power Authority along functional lines of generation, transmission and distribution and retailing and the incorporation of the various business segments as successor companies, and a method for the transfer of assets, liabilities and personnel to these successor companies, which are to be subsequently privatised.?

The Nigerian?national power utility company was unbundled into a series of 18 successor companies: six generation companies, 12 distribution companies covering all 36 Nigerian states, and 1 national power transmission company. This unbundling paved the way for an ambitious privatization program to be carried out by the Bureau of Public Enterprises in Nigeria.

On 30 September 2013, following the privatization process initiated by the Goodluck Jonathan regime, PHCN (Power Holding Company of Nigeria) ceased to exist. In its stead, the Nigerian Electricity regulatory Commission (NERC) was formed. The independent regulatory agency, as provided in the Electric Power Sector Reform Act of 2005 was tasked with monitoring and regulating the Nigerian electricity industry, with issuing licences to market participants, and with ensuring compliance with market rules and operating guidelines.

The unbundling?of the Nigerian power sector into 18 successor companies: six generation companies, 12 distribution companies and 1 national power transmission company led to massive opportunities for the positive development of the electricity sector. Prior to privatisation (unbundling) of the sector, generation of electricity was controlled mainly by the government. In this regard, the government owned and managed three hydropower plants and seven thermal power generating stations. But with the unbundling, private investors are now encouraged to apply for generation licences under the Act and set up independent power plants.?