Electric Power Sector Reform In Nigeria Management Essay

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The power catastrophe is one of the prime brakes on the economic growth of Africa's most densely inhabited nation- Nigeria. The Nigerian economy needs at least 10,000MW of electricity. But since the commencement of the Umaru Musa Yar'Adua led administration in May 2007, power generation has alternated between 1,700 megawatts and 3,000 megawatts.

Nigeria's electric power sector requires extensive reform if the country's economic development and poverty mitigation program is to be realized. This perception is behind the reform programme in recent times initiated by the Nigerian government by means of the goal of privatizing the national electric power monopoly, (Power Holding Company of Nigeria) PHCN. At present, the country faces serious energy crisis due to declining electricity creation from domestic power plants which are basically obsolete, unreliable and in an appalling state of disrepair, reflecting the poor maintenance culture in the country and gross inefficiency of the public utility provider. Minister of Power, Dr. Lanre Babalola, disclosed on the 17th of March 2010 that the full implementation of the Federal Government's ongoing power sector reform process, delayed the privatization of the premeditated financial and governmental autonomy of the PHCN. The Federal Government has agreed that, indeed PHCN needs a more scrutinized reform and not privatization due to the attempts and failures of reforms established in the past. If Nigeria implements its national utility reform programme, there is therefore the opportunity to consider what objectives are best to establish a transformational reform.

It is hoped that this research will benefit policy makers, emerging managers and providers of electricity service in the country to establish a better reform which would in turn produce a better Nigeria in the long-run.

The National Electric Power Authority (NEPA) presently known as Power Holding Company Nigeria (PHCN) was formed in 1972 when the Electricity Company of Nigeria (ECN) and Niger Dams Authority (NDA) was merged (Ighodalo, 2006). For several years, in spite of steady money investment by the Federal Government into the power sector, power outages have been seen as customary by the Nigerian citizens. The power sector reform of 2005 including its objectives, some regulatory bodies are discussed below.

NERC is the main regulatory body of the electric power sector. It acts as an independent body with seven full time commissioners to be chosen from both public and private sector (BPE, 2010). The skill sets and selection criteria for the commissioners is expressly stipulated in the power sector reform act. The responsibilities of NERC, which is currently under review, include licensing of successor power companies, establishment of electricity tariffs, enforcement of performance standards, and the protection of consumer rights (BPE, 2010).

Electric Power Sector Reform Act 2005

The Electric Power Sector Reform (EPSR) Act 2005 was established to provide a governmental framework for the reform of the Nigerian power sector in agreement with the policies which were set out in the National Electric Power Policy. ESPR Act removes operational and regulatory duties of the power industry from the FG. It provided the legal support for the unbundling of PHCN and development of successor companies to take over the different functions, assets, liabilities and personnel. In addition, the Act provides for the determination of tariffs and provide for other related matters. It also revoked the Electricity Act and the National Electric Power Authority Act. Putting forward the EPSR Act by the enactment on 11th March 2005, BPE took obligatory steps to incorporate the Power Holding Company of Nigeria, Plc (PHCN).

June 28 2005 saw the World Bank Board of Executive Directors approving an International Development Association (IDA) credit of $172 million to support the Nigerian government energy sector reform effort (World Bank Website). The allocated credit was also in a bid to facilitate the smooth transition of the sectors to the new market as well as institutional structure. BPE[1] has in a bid to attract investors issued an invitation for Expressions of Interest (EOI) for core investor / concessions of electricity Distribution Company. The privatization enterprise has recently announced that it has received 414 EOI by investors wishing to manage the electricity sectors all based on the implementation of the EPSR Act.

2.3 Objectives of the Power Sector Reform

To attract private sector investment and keep the development of the power sector to ensure uninterrupted and proficient power supply in the Nigeria, the NCP defined the objectives for power sector reform.

Table 1: Objectives

  • To advance competition to aid more rapid provision of service throughout Nigeria;
  • To construct a novel legal and regulatory setting for the sector that creates a level playing field, support private investment and expertise, and achieve social goals;
  • To reorganize and privatize the Power Holding Company of Nigeria (PHCN);
  • To support successors to PHCN to commence an ambitious investment programme.

Source: BPE (2010)

With regards to the title and the reform policy the government is embarking on, several researches has been carried out on the problems of the sector and various efforts made by the government on eliminating them. Recently the EPSR Act has been in search of the new policy that will reform the sector.

In addition to researching the challenges of the present electricity reform, this research will look at other issues like, permission planning, human resources, route plans way leaves and union actions that arise as a result of the EPSR Act in order to have a good insight of relevant previous trends and research that have emerged to suggest suitable objectives for a better reform that would solve Nigeria's power-supply issues.

3. Research Question

Distinctively, this research proposes to investigate the following:

  • What key objectives should Nigeria's Power Sector Reform adopt to tackle the never ending electricity supply issues in the Nigerian Economy?

4. Research Objectives

  • To examine power supply sector and the regulatory frame work that will bring about a better in order to make for competitive markets.
  • To understand the reason for the inefficient and irregular electric power supply in Nigeria.
  • To make recommendations for the successful operation of the EPSR Act that will make for sustainable electricity supply.

After researching the above objectives, attempts will be made to explain the effects a prominent power sector reform in the Nigerian economy and the road map for sustainable economic development. The study will focus mainly on the challenges encountered and solutions that can be given as to correct the EPSR Act.

5. Methodology

5.1 Sampling population: this will consist of top government officials in the power-supply sector as well as knowledgeable few individuals, both groups in separate focus groups made up of male and female. This population has been chosen based on the criteria that the individuals for this research would need to have a prior understanding of the energy industry and would have something to say about the topic. I intend to get access to them through the connections stored up that I was able to make while working in Nigeria prior to doing my masters now.

5.2 Data collection: This research will be carried out by using both primary and secondary data sources. This is due to the fact that over reliance on one source of data could lead to inaccurate conclusions. More so, with the nature of this research topic, feedback is needed.

For primary data, 6 focus group interviews of 10 will be used making the total number of interviewees 60. The uniqueness of focus groups is its ability to generate data due to synergy of group interaction. This would enable the individuals elaborate more on their opinions, data generated through this method are often deeper and richer than one-on-one interviews and data received interpreted better with the help of recorded conversations during the interview process. Reason for 60 individuals being that, past researchers have chosen larger groups thereby turning interviews into forums and board meetings and at the end, they are not able to draw a reasonable conclusion due to too much information.

5.3 Methodology approach and philosophy: This approach to selection of sampling population relates to the concept of ‘Applicability' whereby participants are selected based on their knowledge of the subject area.

5.4 Data analysis: Qualitative and quantitative data collected from reliable sources will be used to indentify conduct a proper literature review and to compare and contrast answers with the primary data. This will include data all available and published documents from the International Monetary Fund (IMF) reports and databank, The World Bank, academic Journals, Nigerian Official Statistic Bulletins, World Development Reports, selected sources on the World Wide Web and other related sources. It is however, important to note that secondary data has certain limitations. These include the risk of data biasness and the possibility of errors being introduced during the interpretation of the analyzed data. Audio recordings will be transcribed using Nvivo, a computer software for qualitative data analysis.

5.5 Research limitations: However, it should be noted that focus groups are prone to bias (Saunders et al, 2009).

6. Resources

I have access to both computer hardware and software. I also have a contact with representatives of World Bank, IMF subject to confirmation who has agreed through several communications using email to provide all additional and relevant research to the Nigerian electric power sector.

7. Timescale

Below is a proposed timetable of my research using the Gantt chart.

Activity/Months

April

May

June

July

August

21

23

28

18

21

26

28

4

11

18

25

2

9

16

19

28

2

3

4

10

18

Submit Proposal

Meeting with supervisor

Literature research

Research Design

Survey PHCN

Conduct Interviews

Analyze Data

Meeting with supervisor

Submit first Draft

Amendments

Meeting with supervisor

Submit for binding

Final Submission

References:

BPE (2010) http://bpe.dev.bsh-bg.com/en/companies/power/power_status.htm [Accessed 22/04/2010]

Ighodalo, (2006) A Reform and Evolution: The New Nigerian Electricity Power Industry, Ighodalo & Banwo, Lagos.

PHCN WEBSITE: http://phcnikejazone.org/home.html

Saunders, M., Lewis, P. and Thornhill, A. (2009) “Research Methods for Business Students”. 5th edition, London: Prentice Hall

UB NUMBER: 09019114

[1] BPE- Bureau of Public Enterprises is the National council on privatisation (NCP) secretariat and is charged with the entire responsibility of implementing the Nigerian privatization and commercialisation policy.

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