PHCN Privatization: Final Solution To Power Failure?


The Power Holding Company of Nigerian (PHCN), formerly the National Electric Power Authority (NEPA), is an organization that generates, distributes and transmits electricity in Nigeria.The statutory function of NEPA was to develop and maintain an efficient, well coordinated and economical system of electricity supply through the country. NEPA was to enjoy the monopoly of all commercial electricity supply to the exclusion of all other organizations. This perhaps, did not prevent private individuals who wished to buy and run thermal plants for domestic use from doing so.

However, due to critical and prolonged problems within the Nigerian power sector, particularly power outages, unreliable services and poor management, the Nigerian government was compelled to take radical action. It enacted the 2005 Electrical Power Sector reform Act (EPSR Act) which called for unbundling of national power utility company into a series of 18 successor companies- six generation companies and eleven distribution companies covering all 36 states and a national power transmission company.

The act stipulated that ownership of these companies be granted to the Bureau of Pubic Enterprises, the privatization arm of the Federal Government and the Ministry of Finance. This unbundling therefore paved the way for an ambitious privatization program to be carried out by the Bureau of Public Enterprises in Nigeria.

According to records, on February 21, 2013, the Bureau of Public Enterprises, on behalf of the federal government of Nigeria, and the 14 preferred bidders of the 17 companies created out of PHCN, executed share sale agreements and Concession Agreements (Transaction Documents). With 15 days to pay the initial deposits, the federal government and preferred bidders worked together to achieve all the necessary steps for the handover of facilities to investors.After the execution of the contracts, the next stage was the handover of the share certificates by government to the investor companies. After several hurdles, including agitation by electricity workers, the federal government on September 30th 2013 finally handed over share certificates and licenses to new core owners of 15 out of 18 successor companies of PHCN.

These notwithstanding, the take-over of the PHCN has generated many questions as to the credibility of those behind the purchase and what they are expected to deliver in terms of capacity handling, stock of manpower and expertise, as well as quality (dependable, if you like) service delivery  across their areas of jurisdiction.Probably, the local owners of the new power companies are mostly investors who had hitherto been into other unrelated business ventures and had little or no technical knowledge of how these unbundled power firms operate. But investigations revealed that in all the cases, local investors have partnered with foreign partners with technical expertise in acquiring the plants and are relying on that expertise to turn the plants round.

The new owners of the privatized PHCN have been given a target to ensure increased generation of an additional 5,000MW within the next years. Speaking during the formal handing over of share certificates and licenses to the new owners at the Presidential Villa, Abuja, Vice president Namadi Sambo emphasized that the target has been captured in the performance agreement reached with the investors. “The new owners of the generation companies are expected to build up capacity from the present levels of performance to additional 5,000MW within a period of five years. This promise has already been clearly captured in the performance agreement that the new owners have with the Bureau of Public procurement which will be monitored by the regular”.

With this development, Nigerians have obviously expressed the hope for improvement in electricity supply. Some perhaps, believe the privatization of the sector would rip the problem of regular outages In the bud. But then, privatization may not completely solve the problem of epileptic power supply without considerably tackling the problem of transmission. If they are able to achieve complete privatization, that is, from the generation to distribution, then electricity output will certainly improve because no one wants to invest money and lose it.It is also hoped that privatization will bring about efficiency of only in building, but also in power supply. This can be possible since when one spends billions on licencing and equipment as an entrepreneur, he will ensure that it works as desired. In other words, there is a high expectation of some kind of stability in the system.

Moreover, the success of this privatization process and the entire process of generation, distribution and transmission of electricity in Nigeria is crucial to the economic development and advancement of Nigeria. No nation can develop with a very unstable supply of electricity, because to a large extent, the economic and industrial growth of any country is intricately tied to its ability to constantly supply electricity.

Other outstanding problems, including old and wretched infrastructure, as well as poor grid protection system, must now be addressed. The power sector is too important to the economy and development of the country to be toyed with. Hence, failure by a company to meet requirements should not be sufficient reason for the process (privatization) to suffer any further delay. The previous administrations power sector blue print has already suffered undue delays. This current move should be able to kick-start the restoration of Nigeria’s industrialization vision and economic prosperity.



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