Nigeria’s Power Blackouts Worsen as Parliament Rejects State Funding for Private Power Firms
The Nigerian parliament is currently resisting an attempt to underwrite the private companies that run the country’s power sector with public money, saying they need to improve the “abysmal” service they provide.
According to reports, the West African nation, long crippled by blackouts, privatised its electricity sector in 2013 in an effort to improve supplies and attract new investment, neither of which has happened.
In a public hearing on Tuesday, lower house Speaker Yakubu Dogara criticised the plan by the state-backed Nigerian Bulk Electricity Trading Company to issue a 309 billion naira ($983 million) bond to pay monies owed to the firms that took over.
“The whole essence of the … reform was to bring about efficiency to the Nigerian electricity industry,” Dogara said. “Since the transfer to privately-operated companies, we have not had a good report. The statistics show an abysmal situation.”
Chronic power shortages are one of the biggest constraints on investment and growth in Africa’s largest economy.
Despite the privatisation, Nigeria still produces just a tenth of the 40,000 megawatts a day needed to guarantee supply to its 180 million people, and the system continues to bleed money.
The bulk trading company was set up to guarantee payments to generators from distributors but, with many consumers leaving bills unpaid, is now running a deficit of around 700 billion naira that is growing by 25 billion naira a month, Dogara said.
After privatisation, the government said it would review tariffs as more power was generated and upgrade the transmission network to give more people access to the grid. But tariff reviews have not kept pace with rising costs, worsened by a 30 percent devaluation of the naira currency in June, analysts say.
In August, the power firms warned they would shut down supplies unless the government paid bills due from pre-privatisation days.
The central bank has provided a 213 billion naira loan to allow them to access credit and keep the system afloat, but an oil price slump that began in 2014 has forced the OPEC member state to tighten the purse strings as state revenues have shrunk.
With the slump also having hammered the naira, Nigeria is in its worst economic crisis in 25 years.
The government planned a record 6.06 trillion naira budget for this year to kick-start a recovery but has struggled to fund it.