ABSTRACT
Nigeria’s electric power sector requires substantial reform if the country’s
economic development and poverty alleviation programme is to be realized.
Currently, the country faces serious energy crisis due to declining electricity
generation from domestic power plants which are basically dilapidated, obsolete,
and in an appalling state of disrepair, reflecting the poor maintenance culture in
the country and gross inefficiency of the public utility provider. The government
encouraged the private sectors to invest into the electricity industry so that, the
monopoly created by the NEPA could be demolished and at the same time, some
independent power producers could enter into the electricity sector. This
understanding is behind the introduction of the Power Sector Reform Act 2005
which was recently initiated by the Nigerian government with the goal of
privatizing the National Electric Power monopoly, NEPA.
Age long principles of democratic governance, of sovereignty belonging to the
people, the people’s entitlement to participate in their governance and most
importantly from the point of view of the topic of this paper, that security and the
welfare of the people are the principal aim of government, form the theme of the
provisions of section 13 of the 1999 Constitution.
In Section 16 of the same Constitution, the second aim of government of
ensuring the welfare of the citizens seems to be pointedly enjoined as the state is
mandated therein to harness national resources and promote national prosperity
and an efficient, dynamic and self-reliant economy which it shall control to secure
maximum welfare, freedom and happiness of the citizens and without truncating
the rights of individuals to participate in the major economic areas.
Building on the analysis of the introduction of the Reform Act, this long essay
intends to present the central issues that led to d enactment of the Reform Act, the
key objectives of the Reform Act. This includes the legal reforms, the Act, the
essential sections, licenses and tariffs, tariff regulation, consumer’s protection, the
impact of the reform, the shortcomings of the reform, the innovations and the
consequence of the reform.
This steady decline in the Nigeria Electric Power Sector has led to a near
complete failure of the system at the onset of the present civilian regime in 1999.
The Reform program also led to the establishment of the Nigerian Electricity
Regulatory Commission in 2005 which was made responsible for the regulation
of tariffs. This long essay will therefore also examine the role of NERC as a
sector regulatorS and its impact so far in establishing a licensing regime that will
be attractive to potential investors.
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As Nigeria implements its national utility privatization program, it is hoped that
this legal review will benefit policy makers and emerging managers and providers
of electric service in the country.
CHAPTER 1
GENERAL INTRODUCTION
1.0.0: INTRODUCTION
Regular power supply is the hallmark of a developed economy. For the economy
of any nation to grow, the country must invest heavily in all the sectors including
social institutions, agriculture, healthcare, good network of roads, efficient
transportation system, reliable power sector and must tame financial instability.
Nigeria has over the years witnessed a slow steady decline in the power sector
which has led to a near complete failure of the system at the onset of the civilian
regime in 1999. Every person living in Nigeria has one or two stories to tell about
the unreliability of the Nigerian power sector, is it the housewife who looks on
dejectedly as she sees the food she has painstakingly prepared turn bad due to
inadequate power supply, or the students’ frustration and disappointment as they
read overnight with candles in preparation for an examination, or the upheaval in
the hospital as a result of the power failure during a surgical operation, or the
incessant hum of generators that accompanies you everywhere you go to mention
just a few.
A nation whose energy need is epileptic in supply prolongs her development and
risks losing potential investors. After 50 years of independence, Nigeria, a country
of over 140 million people and richly endowed with various sources of energy,
crude oil, natural gas, coal, hydropower, solar and wind etc is still mired in the
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dark. Poor electricity supply has been a serious problem in Nigeria. And despite
the huge amount of money said to have been expended by successive
administrations to revamp the power sector, there is no evident or obvious change
as not much seems to have been achieved as the country still witnesses frequent
and persistent power outages.
While businesses crumble daily owing to this long running problem of power
supply with manufacturing companies spending so much to generate own power
supply with the costs eating into profits, generator dealers are the beneficiaries of
the rots and decays in the power sector as virtually every business in the country
patronizes them.
Restructuring therefore necessitates changing the overall structure of the
electricity industry. It involves mainly the separation of the competitive from the
monopolistic components of the industry such as generation versus transmission;
distribution versus supply of electricity, transmission and distribution are
considered natural monopolies, while generation and supply are highly
competitive business ventures.
This long essay is however targeted towards examining how and why the power
sector has gotten to this level of decadence, what has been done so far and the
challenges ahead. The project would be restricted to the legal aspects of the power
sector reform program in Nigeria.
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1.1.0: BACKGROUND TO THE STUDY
This long essay was necessitated by the ongoing reforms in the country due to the
instability and steady decline in the major aspects of the economy. The reform is
an ongoing process in which the government of the country has recently dedicated
itself to.
Therefore, the researcher intends to analyze specifically the legal reforms in the
power sector and examine the power sector as it used to be, as it is now, as it
ought to be and the practicability of the reforms embarked upon
1.2.0: AIMS AND OBJECTIVES
The aims and objectives of this research work are; firstly to make us understand
the reforms in the power sector in its strict legal sense. Secondly, to examine the
practical application of the reforms in the Nigerian policy and thirdly to know
what extent the reform is practicable and whether the doctrine has been given a
chance to operate in its strict legal sense. This research work is also aimed at
bringing out suggestions to restructure the understanding of the populace,
especially at correcting the erroneous notion of the majority of people about the
impossibility of a reliable power sector.
1.3.0: FOCUS OF STUDY
This study will focus on the concept of power sector, power sector reforms in
Nigeria, the extent of these reforms while reiterating the potentials of power
sector reforms as a tool for economic development if properly enforced.
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1.4.0: SCOPE AND LIMITS OF THE STUDY
The scope of this research work in the power sector is on the legal reforms
embarked upon by the government and its applicability. It would examine the
meaning, nature and structure of the reforms. This work in particular will evaluate
the power sector from the time of independence till date, and the practical
applicability of the legal reforms. It shall also examine and analyze the Electric
Power Sector Reform Act 2005 which led to a lot of innovations in the power
sector and how the government has coped with these innovations. Though this
work would be done under the constraints of a time limit notwithstanding
evaluation of its failure, success or prospects would be left for the readers’
conclusion.
1.5.0: METHODOLOGY
The method to be employed here in carrying out this research would be by means
of secondary sources which is mainly documentary. Information would be
sourced from the internet, journals and public lectures delivered by various
stakeholders. Legal libraries would be consulted in order to have provisional legal
information about the power sector in the modern world.
Also, in illustrating the practicability of the reform, various provisions of the
Electric Power Sector Reform Act 2005 would be used, great reliance would also
be placed on textbooks on the power sector, and the Act would however serve as
the primary source of all the provisions to be analyzed.
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1.6.0: LITERATURE REVIEW
As it is, there is no single textbook on the topic of this research; there are however
related articles which though relevant do not directly discuss our topic. So this
work is basically going to be a personal research using the limited resources at my
disposal to undertake a comprehensive study of the power sector in Nigeria and
how it can be improved. However, various authors expressed their minds on the
reform.
Adoghe A.O in his article1after a brief and comprehensive analysis of the power
sector was of the opinion that a reform was due in the power sector and that the
country was on the right course as the Nigerian Electricity Regulatory
Commission2 was doing a satisfactory job and he was positive of the outcome.
O.I Okoro and E. Chikuni in their journal3 said that the major reason why the
services of NEPA have remained poor is essentially because of monopoly. The
company has been the sole provider and distributor of electricity to the entire
nation and it is envisaged that the reform program will usher in a competitive
energy market, break the monopoly enjoyed by NEPA and increase the rate of
technology development as well as provide jobs for both technical and nontechnical
graduates.
1 Adoghe A.O, ‘Power sector reforms in Nigeria; likely effects on power reliability and stability in
Nigeria’ accessed on 25 July2010.
2 Hereinafter referred to as NERC.
3 O.I Okoro and E. Chikuni, ‘Energy in Southern Nigeria’ (2007) 18(3).
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Professor Bartholomew Nnaji who doubles as the presidential adviser on Power
as well as the Chairman, Presidential Taskforce on Power traced the repeated
failure to resolve the seemingly intractable issue of power supply and distribution
to lack of a clearly defined roadmap by previous administrations and therefore the
government’s recent decision to privatize the power sector should be applauded
and looking at the liberalization of the telecommunications sector and the healthy
competition that the private investors and carriers have brought into the sector
should inspire a similar policy for PHCN.
Barrister Onjefu Adogu, a legal consultant to the Bureau for Public Enterprises
(BPE) and Securities and Exchange Commission (SEC) was also of the opinion
that reforms in the power sector will certainly galvanize and ensure optimal value
of privatization to the Nigerian economy.
Dr. Goodluck Jonathan,4 in his foreword to the Roadmap for power sector reform
in Nigeria5 said that the growth, prosperity, and national security of any country
are critically dependent upon the adequacy of its electricity supply industry. And
that the link between electricity supply and economic development is such that the
health of the industry is a matter of deep and personal concern to all citizens
4He is the President and Commander-in-Chief of the Armed Forces, Federal Republic of Nigeria
5 President Jonathan, ‘RoadMap Launch – Brochure’
20Reform%2520Full%2520Version.pdf> accessed on 20 November 2010
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thereby making the full implementation of the electric power sector reform a key
priority.
1.7.0: DEFINITION OF TERMS
REFORM:
Reform means to improve an existing institution, law, practice etc by alteration,
correction of abuses. It could therefore be said to be an improvement or change
for better, especially as a result of correction of legal or political abuses or
malpractices. It is also a series of actions advancing a principle or tending toward
a particular end.6
POWER:
Power means the ability to cause or prevent an action, make things happen; the
discretion to act or not to act. It could be said to be an instrument transferring or
vesting legal authorization.7
PRIVATIZATION:
Privatization means the transfer of ownership of property or businesses from a
government to a privately owned entity. It was a transition from a publicly traded
and owned company to a company which is privately owned and no longer trades
6 Reform, ‘Definition of Reform’ accessed on 18
April 2011
7 Power, ‘What is power? definition and meaning’
accessed on 18 April 2011
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publicly on a stock exchange. When a publicly traded company becomes private,
investors can no longer purchase a stake in that company.8
ELECTRICITY:
It is a fundamental form of energy observable in positive and negative forms that
occurs naturally (as in lightning) or is produced (as in a generator) and that is
expressed in terms of the movement and interaction of electrons. It could
therefore be said to be an electric current or.9
LAND:
it is the solid part of the surface of the earth; opposed to water as constituting a
part of such surface, especially to oceans and seas; as’ to sight land after a long
voyage. It could also be said to be any portion, large or small, of the surface of the
earth, considered by itself, or as belonging to an individual or a people, as a
country, estate, farm, or tract.10
1.8.0: CONCLUSION
Privatization is therefore not just an end but a means to an end, the end which
means availability of power and unless we undertake reforms, the aspirations of
Nigerians in the power sector would remain a dream because to have power, there
8 Leslie Rutherford and Sheila Bone, Osborne Concise Law Dictionary (8th ed. Sweet and
Maxwell, 1993)
9 Electricity, ‘Definition of Electricity’
accessed on 18 April 2011
10 Land, ‘Define Land at dictionary.com’ accessed
on 18 April 2011
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is a need for reforms to attract investment in the power sector as no investor
would want to invest in the power sector as it is. And as Nigeria implements its
national utility privatization program, the intention is for this legal review to
benefit policy makers and emerging managers and providers of electric service in
the country.