Nwalutu Alloy

NWALUTU ALOY NNAM
MBA/2000/OA/0394
ASSESSMENT OF POWER REFORM

PROGRAMMES
A THESIS SUBMITTED TO THE DEPARTMENT OF MANAGMENT, FACULTY OF

BUSINESS ADMINISTRATION, UNIVERSITY OF NIGERIA, NSUKKA
MANAGEMENT
2011
Digitally Signed by Webmasters Name

DN : CN = Webmasters name O= University of Nigeria, Nsukka
Webmaster OU = Innovation Centre
i
DEDICATION
This project is dedicated to my mother, Madam Chieke Nwalutu.
ii
CERTIFICATION
NWALUTU ALOY NNAM, a post graduate student of the department of management
whose Registration Number MBA/2000/OA/0394 has satisfactorily completed in
requirement for the course and research work for the award of Masters in
Business Administration (MBA) Degree in Management by the Department
of Management, University of Nigeria Enugu Campus.
______________________________
Nwalutu Aloy
Student
___________________________ ___________________________
Dr. U.J.F. Ewurum Dr. U.J.F.Ewurum
(Project Supervisor) (Head of Department)
___________________________ __________________________
Date: Date:
ACKNOWLEDGMENT
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I wish to sincerely acknowledge the contributions of some individuals that
made this work a reality. In that vien my gratitude goes to my project
supervisor Dr. U.J.F. Ewurum for his untiring efforts and understanding
towards successful completion of this project.
This acknowledgment is not complete without mentioning of my deep
appreciation to my beloved wife, Mrs. Francisca Ada U. Nwalutu for her care
and support all through this work. Finally, I give all the glory, honour and
adoration to the Alpha and Omega, the one that was and is and forever shall
be for His kindness, love and mercy upon my life and for making it possible
for me to realize my quest for further education.
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TABLE OF CONTENT
1. Title Page
2. Certification.. i
3. Dedication. ii
4. Acknowledgment . iii
5. Table of Content. iv-v
6. Absract-------------------------------------------------------------------vi
CHAPTER ONE:
6. Introduction 1
7. Statement of the Problem 2-3
8. Objectives of the Study 3-4
9. Research Question 5-6
10. Hypothesis 6-8
11. Significance of the Study 8
12. Scope of the Study. 9
13. Limitation of the Study . 9
14. Historical background of Electric power sector in Nigeria . 10-11
CHAPTER TWO:
15. Literature
16. Definition of Reform . 13
17. Elements of Reform .. 14
18. International and National Context of Reform 14-15
(i) Need for Reform
(ii) Objectives of Electric Power Sector Reform
19. Nigeria Electric Power Sector 17-23
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20. Electric Power Sector Reform Programme 23-24
21. Current Reform Framework ... 24-27
(i) Nigerian Electricity Regulatory Commission (detailed)
CHAPTER THREE
22. Research Methodology
23. Research Method. 28-29
24. Sources and Method of Data Collection 29
25. Sampling Size. 29
26. Tools for Data. 29
CHAPTER FOUR
27. Data Presentation and Analysis 31-45
28. Review of past work done on Reforms 45-47
29. Performance Evaluations of Reform Options: 48-64
30. Impact of Electric Power Sector Reforms: 65-69
CHAPTER FIVE
31. Lessons learnt 70-
32. Findings 70-71
33. Challenges 72
34. Recommendation 73-74
35. Conclusion 75
36. Areas for Further Study 76
37. Bibliography . 77
38. Tables 78
39. Figures 78
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ABSTRACT
In the preposition to stimulate a genuine dynamic of development and to rise

above the economic, social, political and environmental crises that have
beleaguered the nation more or less permanently since the late 1990s. The federal
Government of Nigeria introduced several reforms amongst them are the electric
power sector reform. Which were aimed at improving financial and technical
efficiency of utilities, facilitating divestitures and guaranteeing future electricity
supply. The goal of this study is to assess the electricity power sector reforms by
examining the socio-economic and environment impacts of power sector reforms
and use the result of the assessment to determine the extent to which the reforms
have made power sector reform in Nigeria sustainable. The study analyzes the
technical and economic characteristics of the electricity sector, special conditions
prevailing in this sector that determine its developments, the main issues that were
faced prior to the reform movement, the status and prospect for electric reform.
This study is organized in five chapters, chapter one provides the background of
the study, chapter two provides an overview and stature of the power sector,
chapter three deals with methodology, chapter four provides the assessment and
analyses of the reform and chapter five brings the key findings and the
recommendations, possible policy option that could enhance the sustainability of
the power sector.
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CHAPTER ONE
INTRODUTION
1.1 BACKGROUND OF THE STUDY
Electric Power Sector has been a major issue and concern in Africa and most
of the developing countries such as Nigeria.
In effort to extend access to electricity to the communities and the nation at

large, Nigeria like other countries have adopted plans to reform the structure,
operation and financing of the power sector and its utilities.
Nigeria is fortunate to have huge energy resources which potentially give the
country ample opportunity to transform her economy and lives of her
citizens. Nigeria set astride over 35 billion barrel of oil, 187 trillion cubic
feet of gas, 4 billion metric tones of coal and lignite as well as huge reserves
of tra-sands, hydropower and solar radiation.
Problems in the organization and management of electric power sector in

developing countries such as Nigeria from the primary constraint to an
efficient electric power generation.
The law which establishes the National Electric Power Authority (NEPA) in
(1972) stipulated that it should maintain an efficient, co-ordinate economic
system of electricity supply for all parts of Nigeria. Thirty-five years (35)
after, we are still in doldrums as far as power availability is concerned.
At the inception of NEPA in 1973 only 5 of the then 19 states capital were
connected to the national transmission gird system. Today practically all the
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state capitals of the 36 states and FCT now are being served from national
gird although haphazardly.
The focus of this project is on the assessment of electric power sector, the
reforms adopted for better services and the extent to which it has impacted in
the Nigeria Economy.
1.2 STATEMENT OF THE PROBLEM

The problem of electricity in Nigeria started surfacing as early as the mid
70s under the moribond electric corporation of Nigeria which lost focus on
paying attention to maintenances of facilities that were generating electricity
in Nigeria.
In the period before the return of democratic rule, the officials responsible
for energy policy believed that the electric power sector has failed to supply
electricity to the society as a whole and the productive sector with adequate
power.
There is no gain saying that energy is a critical and strategic infrastructure

necessary for the development of any nation. It is a catalyst, a life wire and a
driving force for development. Problems experienced during the early 80s
including continued power cuts and voltage level fluctuations, corruption,
poor funding, mismanagement of utilities, poor revenue drive, technical and
non-technical losses etc. convinced the federal government and the policy
makers as well as the general public that there was urgent need for radical
change in the electric power sector.
Furthermore, previous attempts to improve on the state and nature of electric

power sector structure had proven unsuccessful. Vested interest including
the government owned technicians and engineers and bureaucrats, trade
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unions, politicians and private suppliers and contractors stymied the efforts
to provide an efficient and effective supply of electricity.
This convinced the federal government that the only solution was a radical
overhaul of the power sector and a redefined role of the sector and state in its
management.
In reality, there was consensus on the nature of problems plaguing the

electric power sector on the past and current head of federation, public
officials, state representatives, business community etc, but there were
different opinions with regard to the origins of the crisis and steps needed to
solve the problem of electric power generation, transmission and
distribution. It was clear that the sectors technical decline was not
unconnected to economic decay. The necessary technical capability existed,
but maintenance and repair program werent carried out because of financial
and economical difficulties experienced.
The democratic elected government since 1999 has demonstrated its

commitment to meeting the expectation of the people in the area of
electricity supply. This, they learned to achieve by various reforms hence the
reason for the assessment.
1.3 OBJECTIVES OF THE STUDY

The majority of the societies dont have access to electricity supply and
many of those that do have access experience unreliable supply or are forced
to rely on expensive back-ups.
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Power sector in Nigeria failed to provide adequate electricity supply and
services in support of economic growth and improved social welfare.
Since 2001 new ways of organizing the Electric Power Sector have begun to
be explored. Reforms have been adopted to unbundled and privatize the
electric power sector and to introduce competitions.
Yet rhetoric has seldom been matched with implementations of the end
sector model. Nevertheless, while the depth and pace of reforms in Nigeria
electric power sector have not been as extensive as expected, sufficient
experiences have developed over the past years to assessing the impact and
efficacy of the reforms.
The objectives of the study are as follows:
1. Examine institutional framework of parts sector reforms initiatives.

2. The impact of past and current initiatives in the power sector.
3. Suggest innovative ways of ensuring that power sector reforms
improve and met expectations of the society.
4. The study assess whether the reforms taking place are sustainable and
the study incorporated environmental concerns within the context of
power sector reforms.
5. The study seeks to deploy policy and strategies to stakeholders and
the government on how to sustain electricity to nearest lower tariff to
the populace.
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1.4 RESEARCH QUESTIONS
1. How is the electricity supply during the pre-reform era

2. What are the impediments of the reforms towards achieving its
targets?
3. To what extent has the reforms influenced the access and the
quality of electricity to the populace and how effective have these
reforms been?
4. How would the reforms be implored to eliminate the
impediments that are hindering the vision 202020?
5. How the PHCN adapted with the reforms toward increasing
the revenue and the economy, is there any development in
the services delivery and are they better able to provide
reliable and affordable electricity?
1.5 RESEARCH HYPOTHESES

The research will be summarized in two based on the research questions. The Null
to be tested are as follows:
1. HO: Reforms variable (Privatisation) will lead to more capacity and
hence higher output provided that the regulatory regime is supportive.
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2. H1: Reform variables (Privatisation ) will lead to higher price to the
society especially the residential consumer and lower price to the
industrial users as price are aligned with marginal cost.
3. H2: Reform variables (Regulation) will raise prices charged to
domestic consumers.
4. H3: Reform variables (Competition) will lead to a larger capacity, a
higher output and greater labour productivity
5. H4: Reform variables (Competition) will lead to lower industrial user
and to a higher or lower residential user price.
1.6 SIGNIFICANCE OF THE STUDY

The study sought to develop an in-depth understanding of the power sector
reforms. The study adds value to the limited but growing literature on the
power sector reforms in Nigeria. Whilst past studies have mainly assessed
the status and outcomes of power sector reforms, this study adds value by
assessing whether the reforms taking place are sustainable.
The study shall be of great importance:
a. to stakeholders of the independent producers, to ascertain the extent the
reform have influenced them.
b. the executives of the Power Holding Company of Nigeria (PHCN)
adjust to the notable policies from the reforms that are feasible to the
sustenance of electricity.
c. the study will help evaluate and analyze the problems associated with
the reform processes.
d. It will as well give insight to the NERC on the extent the reforms and
how it has incorporated environmental concern within the context of
power sector reforms.
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1.7 SCOPE OF THE STUDY
The study is designed to analyze how and whether the public and the society
interest and benefits were addressed in the reform of Nigerias electric
power sector during the 19990s. The study assesses the implementation of
the process of power sector reforms in Nigeria and then proposes options
that could enhance the sustainability of the power sector.
1.8 LIMITATIONS OF THE STUDY

As research and analysis was being conducted, it is apparent to note that the
project has the following limitations.
Data and information required for the analysis spelt out in the project
methodology was not available.
Some reforms impact could be ascribed to other intervention not
directly related to power sector reform.
In the course of the research, the researchers were not able to conduct
sufficient primary research and interviews on the study with the
relevant officers. This applies particularly to indirect and social
impacts.
Furthermore, lack of the desired cooperation from some of the
respondents, as they were reluctant and at some instances refuse to
give out necessary information and answers to some of the question
posed to them, serve as major constraints of the research work.
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1.9 HISTORICAL BACKGROUND OF ELECTRIC POWER SECTOR IN
NIGERIA:
Nigeria is one of the largest generators of electricity in West Africa. Her
major sources of energy are petroleum, natural gas and hydroelectricity.
Electricity generation in Nigeria is traceable to 1896 in Ijora, Lagos. This
was followed by the construction of a hydroelectric power station in Karu
Jos.
A further development was establishment of Electricity Corporation of

Nigeria (ECN) in 1957. The purpose of (ECN) was to control the diesel and
coal plant. In 1962, the Niger Dam Authority (NDA) was established to
catch up with rapid urbanization and increase demand for electricity utility.
During this period, efforts were made to derive electric power from the
natural water resources.
Another major development in the power sector was establishment of

National Electric Power Authority (NEPA) in 1972 which was a product of
(NDA) and (ECN). The act that guided the operation of NEPA was the
electricity Act and the NEPA Act. The law mandated NEPA to carry out the
business of generation, transmission, distribution and marketing of
electricity to the generality of the country.
The operations of NEPA began with four major power stations which
include: Ijora, Delta, Afam Power Station and Kainji hydro power station.
As at 1998, NEPA ceased to have monopoly of electricity generation,

transmission distribution and sales.NEPA as at April 2005 had ten power
stations of which three are Hydro stations, six are thermal and one coal
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power stations. There are Kainyi, Jebba, Shiroro, Afam, Delta, Sapele,
Egbin,Ijora, Oji and Calabar power stations.
The power stations were grossly inadequate to cater for increasing demand
for electricity. This is due to poor funding, mismanagement of the utility,
corruption, poor services amongst others. These problems are grouped into
three key functions of generation transmission and distribution.
Generation:
(i) Insufficient power being generated to meet the estimated national
demand of 10,000 MW.
(ii) Absence of off-grid mini system to cater for rural electrification.
Transmission:
(i) Fragile and inflexible state of the transmission network to wheel
increased power levels.
(ii) Absence of state of the act dispatch facilities.
(iii) High technical losses.
Distribution:
(i) Absence of power system planning.
(ii) Failure and overloading distribution network
(iii) High technical and non-technical losses
(iv) Uneconomic traffic structures
(v) Inaccurate billing and poor revenue collection
(vi) Inadequate metering leading to non-payment and theft.
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Figure I: Shows the 3 years power development chart (estimated) from 2008 to
2010)
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CHAPTER TWO
REVIEW OF THE RELATED LITERATUE
Definition of Reform:
Reforms according to encyclopedia Britannica (2005) is to form:
(1) Put or change into an improved form or condition.
(2) Amend or improve by change of forms or removal of faults or abuses.
(3) Induce or cause to abandon evil ways.
According to concise Oxford Dictionary (2001) reform is to make change in

something especially an institution or practice in order to improve it.
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From Wikipedia, Reform means beneficial change, or sometimes, more
specifically, recession to a pure original state.
From Brainy quotes Reform is defined as:

(i) To put into a new and improved form or conditions;
(ii) To restore to a former good state, or bring from bad to good;
(iii) To change from worse to better;
(iv) To amend; or to correct as to reform a profligate man.
From the above, it is clear to state that any reform has to do with change of
positive intention to improving an earlier situation, condition, structure and
status.
However negative result do emanate from reforms showing that not all
reforms can bring improvement. Reforms can be grouped according to their
similarity of objectives, process and ideology. Basically reform is broad as
there is economic, political, social and institutional reform.
Electric power reform is the focus of this project which is a serious step to
undertake by any nation for high productivity and growth.
2.1 POWER HISTORY IN BRIEF
Although the push for private sector participation in the power sector was a
departure from the status quo that predominated in most developing countries1 in
the early 1990s, it was not unprecedented. Throughout the end of the nineteenth
century and early twentieth century, the electricity supply industry (ESI) and other
infrastructure industries such as water, transport and some telephone services,
across North America, Europe and parts of South America, Africa and Asia,
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developed largely within free market conditions (Kessides 2004:27). The Pearl
Street Station, the first central power station, pioneered by Thomas Edison in 1882
in New York City, was the result of privately-financed and privately-managed
efforts (Neil 1942:322).
In the same year in South Africa, public private partnerships would lead
to the first electric street lights in the mining town of Kimberly, and later more
widespread electrification, which helped fuel commercial and industrial
development (Steyn 2006:11; Eberhard 2007:218). While the initial push was
private, it was not long before deeper government involvement was evidenced.
This occurred with varying degrees across countries, especially after World War II.
The rationale was four-fold. First, the network component of the ESI was, after
considerable trial and error, classified, as a natural monopoly.
That is, one firm was thought to produce goods less expensively than if
there were multiple firms in the market, as average costs declined as output
increased (Joskow and Schmalensee 1983:29-20; Newbery 2001a:1-2).
Government ownership of the monopoly (or public regulation) was often justified
on the grounds that the state was the custodian of the public interest and therefore
would be the least likely to act in an opportunistic manner, as monopolists were
prone to do.
Secondly, with regard to public ownership of the generation component, the

general argument was based on the fact that significant amounts of capital were
needed, as increasingly large plants were built to capitalize on economies of scale.
The state was often asked to guarantee these investments and became progressively
directly involved through state-owned enterprises. Thirdly, ownership by one sole
firm (government) also helped to ensure the necessary coordination among the
different segments (generation, transmission and distribution). Finally, an
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overarching argument was made about the strategic nature of the ESI, especially
for industrial development, which justified state ownership and operation (Yergin
and Stanislaw 2002:7).
Electric power activities thus were vertically integrated, which meant one
supplier provided generation, transmission and distribution services to a given area
(Hunt 2002:2, 24). The only real variation evidenced was whether the monopolies
were publicly or privately controlled, with the United States, Germany and Japan,
all exhibiting significant private ownership, albeit heavy government regulation of
the industrybut most countries opted for public ownership (Kahn 1988:3; Bacon
1995b:120,121; Patterson 1999:124). By the 1970s and 1980s, however, a number
of political, financial and technical factors converged and started to chip away at
the logic that electricity provision should be handled via a vertically integrated
generally state-owned monopoly. Although not an exhaustive list, five of the major
factors are summarized here.
First, there was a growing movement away from public sector ownership
especially in the UK and Chile, largely 6 due to ideological reasons (Bacon
1995b:120).2
Secondly, as gas-fired combined cycle gas turbines (CCGT) and other smaller,
more modular technologies came on the market, capital costs of plants declined,
along with the need for government guarantees, making them more easy to finance
(Hunt 2002:26-27; Victor and Heller 2007:3).
Thirdly, development of information and communication technologies

enabled the electricity system to be organized and controlled without vertical
integration.
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Fourth, there was increasing doubt of the efficiency of the highly regulated
but vertically integrated utilities (particularly in the USA) (Bacon 1995b:120).
Finally, publicly-owned utilities in most developing countries were
exhibiting persistent poor performance and governments were either unwilling
and/or unable to provide further capital investment. These factors prompted a
move toward private participation and competition (for the non-natural monopoly
components of the system), which was expected would yield improved and less
costly electricity supply (Bacon 1995b:121; Wolak 1998:81).
2.2 STATUS OF POWER SECTOR REFORM

There is a wide spectrum of power sector reform possibilities. However, the two
most popular options are: structural change and privatisation (ownership change).
Structural change is used to refer to the process of unpackaging vertically
integrated utilities into separate generation, transmission and distribution
companies (vertical unbundling) and conversely unpackaging national utilities into
smaller district or provincial utilities (horizontal unbundling).
Commercialization/Corporation:
This involves reorganization of state owned assets preceded commercialization.
The utilities are now managed on commercial principle and are required to earn
market-related returns on equity. There are two key form of this reform namely;
management contract and reforms.
Management contract involves an agreement through which operational
management of the utility or part of it is delegated to a firm of management
consultant, but the assets and investments decision remain under the government.
Tariffs were approved and, in some cases, determined by Government, this is
normally during the period when provision of electricity was perceived as a social
welfare service rather than a commercial service. Governments, therefore, strived
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to ensure that electricity was affordable to all by keeping the tariffs low and, to a
large extent, subsidized. Power sector reforms in the region have led to, among
other developments, increases in the tariff levels in line with the following
objectives:
To recover the cost of electricity generation, transmission and
distribution;
To fairly and equitably spread the above costs to consumers based on the
true cost of service delivery, consumption levels & patterns, and
affordability to pay, and;
To promote the efficient use of electricity.
Independent Power Producers:

This constitute an important form of reform in Africa, it involves the participation
of private investors into the generation of electricity to the state.
Power sector reform appears to have involved limited local private participation in
IPP development. Current trends seem to indicate that, in the medium term, the
exit of the state from electricity generation (and eventually from the entire
electricity industry), would effectively hand over the industry to non-national
operators. In political terms, this may be an unsustainable arrangement. Without
significant local involvement, it is possible that reforms may be reversed in the
future mainly because there would be no significant local stakeholder group.
2.3 ELEMENTS OF REFORM

The element of Reforms that will be explored will include;
(i) Commercialization:- Including performance contracts;
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(ii) Corporatization:- Including clarification of shareholders,
taxes and dividends.
(iii) Restructuring for Competition:- Including IPPs and
unbundling .
(iv) Private Sector participation: - Including management contracts
concessions, privatization and new investment.
(v) Establishment of new regulatory institutions.
(vi) New electrification funding mechanisms.
2.4 INTERNATIONAL AND NATIONAL CONTENT OF REFORM

The transformation of the electricity power sector was condition by lager
macroeconomic reforms, intended to correct serious current account deficit,
fiscal in balances and chronic hyper-inflation plaguing the country. Reforms
are drawn from neoliberal economic thinking on the appropriate role of the
state and market in economic development. Towards the end of 1980s
political and economic analyst and thinkers throughout the Western world
were in state of euphoria as they contemplated the triumph of capitalism the
single idea, the end of history. The end of ideologies were some of slogans
which at that moment populated the content on which reforms was under
discussion.
Development or proceeds from the reforms on various sectors, would

increase materially: funds would be channeled towards health, education and
reduction of poverty etc. Bringing the Eastern block of nations into the free
market system would accelerate their development and open new markets.
To take full advantages of this change, developing countries such as Nigeria

had to deepen the opening of their markets, deregulate their economics,
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reduce the role of the state sector, eliminate political interference and place
all productive resources at the disposal of the market. They had to become
an opportunity of the world and offer competitive and favourable conditions
in order to attract new investment flows unleashed by market.
A first step in this direction was to promote or facilitate private investment

that would in turn generate economic growth, job creation and improve
incomes, reforming tax and employment laws that limit the private sectors
flexibility etc.
A program of state of reforms and the concomitant sale of nations and state
owned enterprises and assets would reduce government deficit and generate
funds that could be used for debt reduction or improvement in education,
health etc. the long-term could be far more better regarding improvements
and developments.
2.5 NEED FOR ELECTRIC POWER REFORM
The need for electric power reform as stated in the National Electrical Power
Policy (NEPP) approved by the Federal Executive council 2001 is stated as
follows:
(i) Improvement in efficiency and affordability of electric power
supply.
(ii) Encourage private sector participation and competition.
(iii) Attract Investment.
(iv) Establishing an independent regulatory agency to ensure level playing
for all market participants.
(v) Providing conducive environment for long-term development of the
sector.
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2.6 OBJECTIVES OF ELECTRIC POWER REFORM
The main objectives of the electric power reforms are:
(i) Fundamental objective which is to ensure that Nigeria has a electricity
supply industry that can meet the needs of its citizen in the 21st
century.
(ii) Other objective is to modernize and expand electricity coverage and to
support national economic and social development.
(iii) To encourage the successors to NEPA to undertake ambitious
investment programme.
(iv) To commercialize state utilities to allow competition, encourage
private involvement, establish regulatory agencies and accelerate
electrification of rural areas
2.7 RATIONAL FOR ELECTRIC POWER REFORM

(a) Restructuring and privatization are not mutually inclusive;
practical logical link.
- Federal Governments decision to privatize requires valuation assets,
revenue assts can earn type of system to adopt for industry structure.
(b) Regulation is introduced to control cost and price to make
investment decisions in the absence of competition.
(i) Regulation is surrogate for competition, where latter is
infeasible.
(ii) If competition is feasible, the issues whether it makes
sense to introduce it and how much to introduce arise.
(c) Restructuring arises in conjunction with considerations of
privatization. Key issues in contemplating changes in a
nationalization monopoly industries.
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(i) Changes in management and ownership.
(ii) Changes in structure (competition and choice).
(d) Privatization is the end-point of changes in the
management/ownership dimension.
(e) Competition is the end-point of changes in the structural dimension.
2.8 THE NIGERIA ELECTRIC POWER SECTOR

Nigeria electric power sector requires substantial reform if the countrys
program is to be realized. Over the years, government policies have not
yielded positive result in the sector. Rather, what is made manifest in the
sector is decadence of the infrastructure which impacts negatively on the
quality of life of citizens, industries and hence economic growth.
The statistics on the power sector have been appalling. Only about 40 per
cent of Nigerians have access to electricity. In terms of efficiency and
performance, the Nigeria electric power sector has been rated by the
UNDP/world bank report 1993 as having one of the highest rate of losses
(33%), the lowest revenue at 156c/kwh, the lowest rate of return (-8%) and
the longest average account receivable period (15 months), among a group
of 20 low income and upper income countries.
Electricity tariffs are below the cost of service and there is poor revenue
collection. According to Tallapragada and Ade Busuyi, (2008), about 30-40
per cent of power supplied is never billed. The power sector incurs a cash
loss of around US $2 billion per month. Over US$400 million annually is
xxvii
spent by the Federal government of Nigeria as an annual subsidy to cover
losses and investment, an amount that is higher than the Federal budget for
health.
The share of self electricity generated in total electricity generated in Nigeria

was 52 per cent compared to less than 1 per cent of middle income African
countries. A bane of the power sector remains the low funding of the sector
as well as the inability of revenue to cover costs. Cost as a percentage of
tariff declined from 83.3 per cent in 2001 to 42.6 per cent in 2003 before
rising to 66.5 per cent in 2004. In view of other demand on its revenue, the
government has shown itself unable to continue to shoulder past energy
financing responsibilities.
Fig. 2 shows the historical funding levels by government for PHCN

operation since 1974.
Source Makoju (2007) citied in Adegbuludla and Adenikinju (2008).
Nigeria has not vested equal attention to her abundant energy resources. Her
effort have been concentrated on the development, exploitation and
utilization of crude oil and gas fiscal objectives and the electricity to power
the economy.
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Table 1 shows the profile of Nigeria electricity Industry infrastructure.
(Source Maigida (2008).
Table 1
Generation Pre-1999 Post 1999
- Thermal 4,058mw 5,010mw
- Hydro 1,900mw 1,900mw
Installed capacity 5,996mw 6,910mw
Available 1,500mw 4,451mw
Transmission
- 330kv lines 4,800km 4,889.2km
- 132kv lines 6,100km 6,284.06km
Transformer capacity
330/132kv 5.18MVA 6,098 MVA
132/33kv 6,230MVA 7,805 MVA
Distribution
- 33kv lines 37,173km 48,409.62KM
- 11kv lines 29,055km 32,581.49KM
- 415v lines 70,799km 126,052.79KM
Transformer capacity 8,34256MVA 12,219MVA
As at 2004 NEPA had an installed capacity of 5906MW and with the

supplement capital from independent Power Producers (IPP) has only been
able to generate 3,400MW. As at April 2005, NEPA had ten power stations
of which three are hydro stations, six are thermal and one coal power station.
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These are Kanji, Jebba, Shiroro, Afam, Delta, Sapele, Egbin, Ijora, Oji and
Calabar.
By the end of 2008 there are up to 12 Numbers power stations being

operated by PHCN.
These consist of 8NO gas fired, 1No coal and 3NO hydro stations. The
power plants and the installed capacity of each are as listed in the following:
TABLE 2 Existing Power Stations
S/N POWER STATION INSTALLED YEAR

CAPACITY COMMISSIONED
1. Oji River Coal 30MW 1956
2. Ijora Gas 30MW 1956
3. Kainji Hydro 760MW 1967
4. Afam Gas 792.6MW 1979
5. Jebba Hydro 570MW 1980
6. Sapele Gas/steam 1,020MW 1981
7. Egbin Thermal 1,320MW 1985
8. Shiroro Hydro 600MW 1990
9. Delta Gas 900 MW 2001
10. Geregu Gas 414 MW 2007
11. Omotosho Gas 335MW 2007
12. Olorunshogun Gas 335MW 2007
TOTAL: 7106.6 MW
Source: PHCN Annual Technical Report
PLANTS SITUATION AS AT APRIL 2008
TABLE 3:
S/N POWER STATION SITUATION

1. Egbin Thermal The station is only capable of producing
xxxi
600MW because 2 out of 6 Units namely (ST3
and ST6) have major breakdown with their
Boilers.
2. Delta Gas Built in 4 Phases from 1966, terminal constraints

have limited the station to only 580MW
3. Sapele Gas/System Overhauls not carried out due to lack of funding.

Only 2 steam unit are available for service.
Produces 1020MW.
4. Afam Gas The Station is only capable of producing

410MW due to some technical constraints.
5. Shiroro Hydro All the four Units at Shiroro will be due for
major overhaul commencing in 2008 produces
600MW.
6. Jebba Hydro Lot of limitation currently inhibiting station
capacity, even though all the Units are all
available produces 578.400.
7. Kainji Hydro Some machines need complete refitting

produces 450 MW.
8. Oji Rive Coal The station is presently not available and is

awaiting final decision of government on its
reactivation.
9. Ijora Gas The plant is not currently generating as a major

reactivation is awaiting government approval.
10. Gergu Gas The contract for the construction of the second
phase of Geregu has already been awarded.
11. Omotosho Gas The contract for the constructions of the second
phase of it has been awarded.
12. Olorunshogu The contract for the construction of the second

phase of it has also been awarded.
xxxii
Fig. 3: Shows TCN 330KV Transmission Grid as at today:
Birinn Kebbi
Kano
Kainji
Shiroro Jos Gombe
Jebba Jebba Kaduna

GS
Abuja
Osogbo New Heaven

Ajaokuta
Ikeja West
Ayede Benin Onisha
Alaoji
Sapele xxxiii
Delta GS
Egbin
Aladja Afam
Aja
Akangba
2.9 ELECTRIC POWER REFORM PROGRAMME
INTRODUCTION
Electric Power Sector reform has become an issue in the past few years. The
motivation is to achieve better services, reliable operation and competitive
rates. The reform to electric power sector started in 2000 with formulation of
a new power policy.
This policy was adopted by National Council on Privatization (NCP) and

approved by the Federal Executive Council in 2001.
The Electric Power Sector Reform (EPSR) Act was signed into law in 2005.
2.10 CURRENT REFORM FRAMEWORK
The BPE played a crucial role in modifying a permanent solution to the

liberalization as a strategy towards economic reform working through
Electric Power Sector implementation committee (EPIC), it developed the
National Electric Power Policy approved by National Council On
Privatization which led to the enactment of the electric power Sector Reform
Act 2005. The Act created Nigeria Electricity Regulatory Commission
(NERC), an independent regulator from the Ministry and the services
providers. It provided for the incorporation of an Initial Holding company
(IHC) the shares of which shall be held by the Ministry of finance
xxxiv
Incorporated and the Bureau of Public Enterprise in the name of and or
behalf of the Federal Government of Nigeria. The name of the Initial
Holding Council, incorporated on the 31st of May 2005, is Power Holding
Company of Nigeria Plc (PHCN).
The Act has the following key provisions which will have great bearing on
the future of regulation of the power Sector in Nigeria.
1. A legislative basis for the splitting up of NEPA into separate legal entities
for generation, transmission and distribution, and a method of transfer of
assets, liability and personnel. The Act makes provisions for the unbundling
of NEPA into an initial holding Company and subsequently into successor
companies that will comprise six generation companies, one transmission
company and eleven distribution companies.
2. The establishment of Nigeria Electricity Regulatory Commission (NERC) as
an independent regulator of the sector and a definition of its functions.
3. The establishment of a regulatory regime including the granting of licences
to private electricity generators and distributors, the determination of tariffs
and regulated activities and the prevention of abuses by the market power.
The tariffs regulation will however, ensure a reasonable return on
investment.
4. The establishment of a bilateral contracts markets in the medium term
following the unbundling of NEPA.
5. The establishment of Rural Electrification Agency to provide rural
communities with access to electricity.
6. The establishment of Rural Electrification fund to promote support and
provide rural electrification programme through public and private sector
participation.
xxxv
7. The establishment of power consumer assistance fund to subsidize
underprivileged power consumers.
8. The repeal of Electricity Act and NEPA Act as amended. The regulations
made pursuant to the Act were however saved.
2.11 NIGERIAN ELECTRICITY REGULATORY COMMISSION (NERC)

OBJECTIVES OF NERC (EPSRs 32A)
i. Create, promote and preserve an efficient electricity industry.
ii. Maximize access to electricity, both urban and rural.
iii. Ensure that the supply of electricity is adequate.
iv. Ensure that prices are fair to both consumer and regulated companies.
v. Ensure safety, sanity, reliability and quality of services.
FUNCTION OF THE NERC (EPSRs 32(2))

i. Promote competition and private sector participation, when and where
feasible.
ii. Establish/approve operating codes and consumer protection standards.
iii. License and regulate generators, transmission owners and system
operators, distributors and traders including tariff price and regulation.
iv. Monitor the operation of the market
v. Administer the power consumer assistance fund.
RELATIONSHIPS BETWEEN THE NERC AND THE
GOVERNMENT
i. The NERC is designed to be an independent body
ii. The government has the power to issue general directives but not to
exercise direct control.
xxxvi
iii. The NERCs independence further protected by the fact that it is self
funding.
iv. The key challenge interims of relations between the NERC and the
government will be to avoid conflicts over privatization and new
investment.
RELATIONS BETWEEN THE NERC, REGULATED COMPANIES
AND CONSUMERS
i. The basic role of the NERC is to protect the long-term interests of
both consumer and investors.
ii. The key challenge is to foster confidence, amongst all stakeholders in
the NERCs decision making.
iii. The courts should be reluctant to over turn decision of NERC that
meet these tests.
The NERC will have to prove itself as a reliable regulator during the
difficult transition from public to private ownership and from vertical
integrations to competition. The Act gives the NERC significant legal
and financial independence. The ESPR Act gives the NERC extensive
powers to regulate the electricity sector.
According to the power sector report (2008), two sets of public sector
action steps emerged in response to the power crisis; there is the
period of infrastructure rehabilitation (1999-2004) and infrastructure
expansion (2004) to date) major part of which is being implemented
under the National Integrated Power Project (NIPP) (Transition
Phase). The other focus on implementing a comprehensive sector
reform (Restructuring; Deregulation and Privatization) within the
framework of the Electric Power Sector Reform Act 2005.
xxxvii
2.12 STATUS OF NIGERIA ELECTRIC POWER REFORM
Power sector reform is often equated with deregulation and
reduction of government participation in electricity industry. The
major reforms that have been taking place in Nigeria are structural
changes and privatization of electric power utilities.
Structural changes refer to the process of unpacking vertically

integrated utilities into separate generation transmission and
distribution companies. (Vertical bundling) and Horizontal
bundling which is concisely unpacking national utilities into
smaller district or provincial utilities.
Nigeria adopted; a reform configuration of 6-1-11 industry structure which

entails:
(i) Establishment of six competing generation companies from existing
NEPA generation facilities, which will be privatized.
(ii) Opening of generation sector to independent producers.
(v) Establishment of one transmission company (Transysco)
(vi) Establishment of electric distribution companies, which will be
privatized. (Discos).
(b) Competition in bulk sales and purchase of electricity to be developed.
(c) Special purpose entity to assure NEPAs energy purchasing
obligations legacy debts and liabilities etc.
The privatization process is essentially an issue of changing ownership of
assets. It commences with bringing the state-owned utilities under a
xxxviii
parastatal. The parastatal is therefore commercialized and it ultimately goes
through several other steps to become a fully privately owned entity.
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 INTRODUCTION
The project Assessing the Electric Power Sector Reform, Issues,
challenges and prospect aim to develop a more and better understanding of
the Nigerian Electric Power Sector Reforms.
The project also intends to identify best practice in reform strategies and to
disseminate research findings to policy makers. The research approach
adopted in this project is based on Nigeria.
xxxix
3.2 RESEARCH METHOD
The basic approach adopted in this project is eclectric which takes on a
qualitative review and evaluation of electric reform for economic
development on the power sector.
The researcher chooses to conduct the study in more qualitative way,

making use of data collections where possible. Basically, there are two
methods depending on the characteristics of the research theme. This
includes;
Historical Research methods
Descriptive Research methods
For the purpose of this study, which gives the project a status of descriptive
and historical, the historical and the descriptive would be employed. These
involved the uses of survey to observe and evaluate the phenomenon. In it,
variables are subjected to proper evaluation, observation, inferences and
conclusions. Means that form the characteristics manifestation of this
method are the administration of questionnaires and oral interview.
Formal interview and survey were conducted but more reliance on existing
studies and survey data coupled with rapid techniques including discussions
and other PRA type approaches. The outcomes were treated as illustrative
i.e. providing anecdotal evidence to illustrate what is found elsewhere.
3.3 POPULATION OF THE STUDY

For the purpose of the objectivity based on the technicality of the project
topic, the targeted population consists of the stakeholders which include the
public, (people running business) Executive of relevant business, regulatory
authority.
xl
3.4 SOURCES AND METHOD OF DATA COLLECTION
The data used in the project are collected through primary and secondary
sources of data. While literary works such as books, journals, magazines etc
constituting the secondary sources of materials used for the documentary
studies in observation and information. The primary source entails carry out
a survey through the administration of questionnaires to the stakeholders,
public, Executives of relevant business, regulatory authority and corporate
organizations. The administration of the questionnaires enables the
respondents to answer the questions in the own time, interviews were
conducted.
Thus the 140 questionnaires to be administered, one hundred (100) would
be administered to the public, twenty (20) each to the executive of the
relevant business organizations, and the Regulatory authority.
3.5 SAMPLING SIZE AND DETERMINATION

In selecting the sampling of the research for all the categories in population of the
study, random sampling method for selecting would be employed. Three hundred
questionnaires will be given to the public, twenty for the executive, and twenty for
the regulatory bodies. To ensure effective coverage of the large population, the use
of statistical formula for a finite population is employed, Taro Yamani (1967). This
is chosen on the basis that it may be too difficult to establish casualty between the
electric power sector reforms and the impact on the society.
n= N
1+N(e)
e = marginal error
xli
n = sample size
I = A constant
N = population size
Here N will be equal to the staff size which is 1400, e = 5%, the sample size
for the research can be determined as;
n = N = 1400
_____________ _______________
1 + 1400 1 + 1400
n= 1400 1400
_____________ = ____________ = 311.11 apprx = 300
1 + 3.500 4.5
3.6 TOOLS FOR DATA ANALYSIS

The data to be presented, interpreted and analyzed would be the response
table statistically tabulated. The interpretation shall be done with the aid
of simple percentage ration.
The analysis of data to be presented would be done by simple analytical
expression. This would involve a close look at the power sector reforms
and the influence on the society and corporate organization. Attempt to
establish the interrelationship therein would be done by subjecting the
hypothesis of the study to empirical test.
xlii
3.7 RELIABILTY OF THE INSTRUMENT
In order to establish reliability, re-test technique were used, the
researcher selected a group of staff in batches, distributed the
questionnaire in different occasions and days so as to ensure the
reliability of the answer. It was found out that the answer given on the
first batch on different days by the groups are the same. The researcher
concluded that the answers are reliable.
3.9 VALIDITY OF THE INSTRUMENT

The instrument used for this study was adapted from Workers Behaviour
Performance rating developed by Archer. This response format used
includes five point scales: Good, Fair and Poor.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
The major challenge facing Nigeria is to reach a sustainable rate of positive
economic growth that will enable Nigeria to cope with soaring demographic
and urban growth. In a bid to stimulate genuine dynamic of development and
to rise above the economic, social, political and environmental crisis that
xliii
have beset the region more or less permanently since 1910s. Nigeria
introduced sectoral reforms; among these reforms are those related to
electric power, which was as analyzed by energy experts, aimed at
improving financial and technical efficiency of utilities, facilitating
divestiture and guaranteeing future electricity supply.
Electricity is needed both to industrialize and provide basic energy for the
majority of the people living off the grid in rural areas and this situation
needs major changes not only for demand but also for the regions and sub
regions.
A total of twenty-five questions were administered in two sets, the first
comprises of fourteen (14) questions given to Regulatory body officials and
the Executives of Corporate organizations. The second consisting of eight
(20) questions was given to the public.
The entirety of the questionnaire administered to each of the section was
returned duly completed, thereby recording a 50% response in this direction.
This implies that the response recorded are true reflection of opinions of the
population of this study and therefore, valid for and adoption and utilization.
4.1 QUESTIONS ADMINISTERED TO REGULATORY BODIES
Description of Questionnaires Received
Number of Questionnaires Sent 300 Copies

Number of Questionnaires Replied 150 Copies
Number of Invalid Questionnaires 150 Copies
xliv
Response Rate 50%
1. How is your opinion about electric power supply being during the pre-
reform era?
RESPONSE FREQUENCY PERCENTAGE

Excellent _ _
Good _ _
Fair 4 20
Poor 16 80
TOTAL 20 100
Field Survey:
The question is meant to determine the state of electric power supply during
the pre-reform, which serve as basis for the dilapidation of the electric power
supply. From the above 75% of respondents confirms the poor state, thus the
response received are reliable and valid for adoption.
2. To what extent has reforms played in improving access to electricity to the

society?
xlv
Excellent 10 50
Good 6 30
Fair 4 20
Poor - -
TOTAL 20 100
Field Survey:
The above shows that 80% of the respondents accept the impacts of the
reforms on the society.
3. To what extent are the targeted and transparent subsides put in place to help
the investors?

Excellent _ _
Good 14 70
Fair 3 15
Poor 3 15
TOTAL 20 100
Field Survey:
The respondent acknowledged that targeted and transparent subsidies are
deployed to assist the investor in realizing profit.
xlvi
4. To what extent has the incentives by the Regulators reduced the prices of
electricity?
Excellent _ _
Good 14 70
Fair 3 15
Poor 3 15
TOTAL 20 100
Field Survey:
The table above shows that 70% of our respondents do state that the
incentives given to the IPP has gone a long way in reducing the pay price of
electricity by the consumers. This further confirms the reliability of the
response received from the perspective of the proximity of the respondent.
5. How has the incumbent invested in the power sector during and after
reforms?
Excellent _ _
Good 14 70
Fair 3 15
Poor 3 15
TOTAL 20 100
Field Survey:
The table above shows that 70%of our respondent do state that the incumbent
participate in investing on the reform activities. This further confirms the
xlvii
reliability of the response received from the perspective of the proximity of
the respondent.
QUESTIONS ADMINISTEREDTO THE PUBLIC AND
STAKEHOLDERS.
1. How has the electricity supply being during the pre-reform era?
RESPONSE FREQUENCY %
Excellent _ _
Good 5 5
Fair 15 15
Poor 80 80
Total 100 100
Field Survey:
From the response of our respondents the electricity supply pre to the
reform is in a very bad state, this is attested by the respondents. Thus 80% of
the response can be seen from the table above.
2. How would you grade the tariff before reform?
Excellent - -
Good 25 25
Fair 40 40
Poor 35 35
xlviii
Total 100 100
Field Survey:
From the table above it shows that the tariff was fair as 40% of the
respondent agrees to this.
3. How would you grade tariff after reform?
Excellent - -
Good 30 30
Fair 45 45
Poor 25 25
Total 100 100
Field Survey:
The response from the table above shows that the tariff is also fair
as compared to the tariff before reform.
4. How has the energy cost of doing business changed?
Excellent 10 10
Good 40 40
Fair 35 35
Poor 15 15
Total 100 100
Field Survey:
xlix
From the table it can be seen that the cost in the provision of energy
incurred by the society and the industry in productions is not high.
5. What is your opinion about privatization in the provision of electricity?
Excellent 25 25
Good 45 45
Fair 25 25
Poor 5 5
Total 100 100
Field Survey:
Table above shows that 70% of our respondents confirm that
privatization has lead to high output of electricity.
6. Public sector finance privatization receipts, how has these receipts been
used to release fund for increase expenditure on electrification
programme?
Excellent 30 30
Good 50 50
Fair 10 10
Poor 10 10
Total 100 100
l
Field Survey:
The table above shows that 80% of the respondent confirms the use
of the receipts on privatization on electrification programme, as the
regulatory bodies is in the picture of the receipts collected.
7. To what extent does the investors engage in the generation of electricity?
Excellent 35 35
Good 50 50
Fair 10 10
Poor 5 5
Total 100 100
Field Survey:
The table shows that 85% of our respondents confirm that the investors
have increased the generation of electricity to the populace.
8. How would you rate and rank the effect of the investors?
High 55 55
Medium 35 35
Low 10 10
Total 100 100
li
Field Survey:
Table shows that 90% of our respondent confirms to high
rank and rating of the investors towards power generation. Thus
confirms the reliability of the response received.
9. Considering the on-going reform process, has PHCN increased in

its revenue due to competition?
High 55 55
Medium 35 35
Low 10 10
Total 100 100
Field Survey:
Table above shows that 90% of our respondents confirms to the high
level in the revenue while 10% on the low level. Thus confirms the
reliability of the response received from the perspective of the
proximity of the respondents to increase in revenue.
10.To what extent has competition led to the increase in the efficiency
and effectiveness in power generation?
Excellent 35 35
Good 50 50
lii
Fair 10 10
Poor 5 5
Total 100 100
Field Survey:
Table above shows that 85% of our respondents confirms to the high
level in the efficiency and effectiveness while 15% on the low level.
Thus confirms the reliability of the response received from the
perspective of the proximity of the respondents to efficiency and
effectiveness.
11. What is the state of the tariff structure and moves to cost reflectivity?
High 25 25
Medium 45 45
Low 30 30
Total 100 100
Field Survey:
The above table shows that the tariff is medium as 70% of the respondents
reflected on this and the bodies ensure that the tariff rates are not heavy on
the consumers. This they do by beefing up the private sectors capital thus
the response is reliable and valid for adoption. However on a contrary, on
reforms that introduces the private sector capital can lead to cost increase.
liii
12. How has the new agents emerge that invest in access to electric power
supply?
Excellent 40 40
Good 45 45
Fair 5 5
Poor - -
TOTAL 100 100
Field Survey:
The question is meant to establish the involvement of electric power agents

(IPPs) in facilitating the generation of electricity in Nigeria. The table
shows a unanimous (95%) view of our respondents indicating that new
agents emerge on electric power investments.
13. Do reforms include the establishment of any special access
mechanisms by the regulators?
Yes 100 100
No _ -
Total 100 100
Field Survey:
The table shows that the special access mechanisms have been induced to
enhance the growth of the independent private producer in the participation
of electricity generations in the society. This is reflected by the unanimous
(100) response.
liv
14. How efficient is the services of the PHCN officials as regard to customers
complains after the reforms?
Excellent - -
Good 15 15
Fair 50 50
Poor 35 35
Total 100 100
Field Survey:
The table shows that the services of the relevant official as regards to
meeting customers complain are still poor irrespective of the reforms
15. How is the reform on social services?
Excellent - -
Good 25 25
Fair 40 40
Poor 35 35
Total 100 100
Field Survey:
From the table the response indicate that the introduction of reforms has
little effect on social services as compared to the pre-reform era. This can be
seen from the 40% on our respondents.
lv
QUESTIONS ADMINISTERED TO THE EXCUTIVES OF
CORPRATE ORGANISATIONS
1. How has the electricity supply being during the pre-reform era?
Excellent _ _
Good _ _
Fair 2 10
Poor 18 90
Total 20 100
Field Survey:
From the response of our respondents the electricity supply pre to the
reform is in a very bad state, this is attested by the respondents. Thus 90% of
the response can be seen from the table above.
2. Does your organization depend on electric power supply for their

operations?
Yes 6 30
No 14 70
Total 20 100
Field Survey:
The question is meant to establish the extent of dependence of the electric
power supply by enterprises and organizations. Thus the 70% response from
our respondents is reliable and valid for adoption.
lvi
3. Have reforms improved access to electricity to the society?

Yes 13 65
No 7 35
Total 20 100
Field Survey:
The table above shows a little effect or margin on electricity supply to the
organizations and other business enterprise. As 60% against 40% indicates
that despite the reform there is still some low level of power supply.
4. Have reforms improved the quality of electricity supply?
RESPONSE FREQENCY %
Yes 14 70
No 6 30
Total 20 100
Field Survey:
The above table confirms that the quality of electricity supply was improved
by the reforms. This was shown by the 70%of the respondent reflected on
the table.
lvii
5. To what extent has the price changes have resulted from the power sector
reform?
High 4 20
Medium 10 50
Low 6 30
Total 20 100
Field Survey:
The table shows that our respondents response the prices as result of the
power sector reforms are medium to the tune of 50%.
6. Do you think that chances are given to the agents (IPPs) in the provision
of electricity supply for business?
RESPONSE FREQUECY %
Yes 15 75
No 5 25
Total 20 100
Field Survey:
lviii
The above table shows that chances are given to the Independent Private
Producers in the generation of electric power generation. There is 75%
acceptability on this and the response is reliable and valid for adoption.
7. How has the (IPPs) impact on the power supply generation been felt and
rated?
Excellent - _
Good 10 50
Fair 6 30
Poor 4 20
Total 20 100
Field Survey:
The table shows that the IPPs involvement in the provision of power supply
is 65% which is a relative mark as regards to power generation.
8. Has the privatization lead to higher price to the resident consumers and
lower price to the industry?
RESPONSE FREQUECY %
Yes 14 70
No 6 30
Total 20 100
lix
Field Survey:
The table shows the conformity to the question in agreement because prices
are aligned with long-run supply cost and because profit, not votes are main
concern of private investors.
9. Have electrification programmes by the PHCN expanded access of small

business?
RESPONSE FREQUECY %
Yes 12 60
No 8 40
Total 20 100
Field Survey:
The above question was meant to establish that expanded access to
electricity allows new enterprise to emerge and enable the interaction of
different business enterprise to benefit from one another. The response is
valid and reliable.
4.2 ANALYZING THE HYPOTHESIS
lx
The empirical results presented in this study based on the result from the
questionnaires, seems consistent with the findings of a number of the
literature reviewed earlier, that point to the importance of competition and/or
effective independent regulation if economic performance is to improve
following privatisation. The review findings in relation to the hypotheses are
as follows;
HYPOTHESIS:
1. (H1)-Reform variable (privatization) will lead to a more capacity and
hence output provided that the regulatory regime is supportive.
Like regulation, privatisation on its own did not seem to generate many
benefits. However, the interaction term between privatisation and regulation
did show a positive impact on electricity penetration, capacity expansion and
labour efficiency. The results underline the importance of regulatory reform
along with privatisation. The results are therefore consistent with the
hypothesis.
2. (H2) - Reform variable (privatization) will lead to a high price to the

society especially residential as prices are aligned with supply cost.
The results suggested that privatisation, even when linked with competition
or regulation does not have a statistically significant effect on residential
prices. The results are the same for industrial user prices. The hypothesis
was rejected.
3. (H3)-Reform variable (regulation) will raise price charge to domestic

user as cross-subsidies are removed.
lxi
The researcher found that regulation, even when associated with
privatisation or competition, does not appear to have a statistically
significant effect on residential user prices. This finding is contrary to
expectation. Independent regulation also seems to have no reliable impact on
industrial user prices, though when independent regulation and competition
co-exist, surprisingly, industrial prices are found to be higher. These results
may reflect the particular crudity of the regulation measure used, in the
absence of a superior alternative. Nevertheless, on the basis of our regression
results the hypothesis has to be rejected.
4. (H4)-Reform variables (competition) will lead to a larger capacity,

higher output and greater labour productivity.
The findings from the researcher are consistent with the notion that
competition does lead to a higher generating capacity per capita and a higher
output per capita. It also leads to higher labour productivity. The hypothesis
was accepted.
5. (H5)-Reform variable (competition) will lead to lower industrial user

and to a higher or lower residential user prices.
The effect on prices was ambiguous. Competition does seem to lower
industrial prices, but the result is reversed when competition co-exists with
regulation. The hypothesis is therefore supported and accepted. Also,
competition does not necessarily lead to more efficiency in capacity
utilization this is possibly because the entry of competitors expands
generating capacity leading to a fall in average utilization, at least for a time.
lxii
4.3 ANALYZING ELECTRIC POWER SECTOR REFORM IN
PHCN
GENERATION EXPANSION PLAN (2007-2010)
Dec 2007 Dec 2008 Dec 2009 Dec 2010

Existing power Station 3,357 4,027 3,880 3,780
Existing IPPs 750 750 750 750
On-going Fli Projects
Geregu (Ph 1&2) 414 414 828 828
Papalanto (Ph 1&2) 167 335 1,228 1,228
Omotosho (Ph 1&2) 167 335 1,228 1,228
Alaoji (Ph 1&2) 504 504 504 1,074
Proposed Niger Delta Ps - 1,127 2,256 2,256
Proposed JV IPPs - 1,100 2,210 2,810
Other IPPs 330 1,035 1,035 1,035
TOTAL (MW) 5,689 9,627 13,919 14,989
COMMERCIALIZATION/CORPORATION
Following the time line provided under the EPSR Act 2005, the BPE sought
and obtained approval from the National Council on privatization (NCP) for
incorporation of (18) Successors companies to PHCN to conform to the 6-1-
11 industry structure approved by power sector in 2002.
lxiii
These are:
(1) Abuja Electricity Distribution Plc
(2) Enugu
(3) Port Harcourt
(4) Kaduna
(5) Kano
(6) Jos
(7) Ibadan
(8) Ikeja
(9) Eko
(10) Benin
(11) Egbin Power Plc
(12) Ughelli
(13) Afam
(14) Sapele
(15) Kainji Hydro Electric Plc
(16) Shiroro
(17) Transmission Company of Nigeria (TCN)
This is the first reform option executed in Nigeria which key objectives is to
ensure the utility runs to operation based on the business principle of profit
maximization. The two key forms of commercialization in Nigeria electric
power sector are management contract and tariff reforms.
From the table 4 it can be seen that every Disco recorded a significant
improvement in the performance between January and December 2006
lxiv
However, only seven out of 11 companies (Discos) performed above their
average target while the performance of the rest 4 were below targets.
INDEPENDENT POWER PRODUCER

Independent Power Producers (IPPs) in Nigeria electric power Sector
constitute an important form of private sector participation. With the demand
of electricity outstripping supply in the country, independent power projects
are becoming major source of new power generation capacity in the country.
Generation capacity availability:

The capacity availability of all the generators during 2006 is shown from the
table; the average total monthly available capacity for all generators was
4,011 MW. The Federal Government generators contributed about 80% of
the available capacity while the IPPs were responsible for 20%. The hydro:
thermal mix (capacity wise) during the year was 40:60.
GENERATION EXPANSION PLAN

TABLE 7:
Dec 2007 Dec 2008 Dec 2009 Dec 2010

Existing Power Station 3,357 4,027 3,880 3,780
Existing IPPs 750 750 750 750
On-going Fli Projects
Geregu (Ph 1&2) 414 414 828 828
Papalanto (Ph 1&2) 167 335 1,228 1,228
Omotosho (Ph 1&2) 167 335 1,228 1,228
Alaoji (Ph 1&2) 504 504 504 1,074
Proposed Niger Delta Ps - 1,127 2,256 2,256
Proposed JV - IPPs - 1,100 2,210 2,810
lxv
Other IPPs 330 1,035 1,035 1,035
TOTAL (MW) 5,689 9,627 13,919 14,989
ESTABLISHMENT OF ELECTRICITY REGULATORY AGENCIES

The establishment of regulatory bodies for the power sector alongside the
amendment/enactment of new Act is the third most popular reform option
implemented. The problem of inadequate autonomy for the regulatory
agencies can be traced back to the process of appointment of their board
members.
The BPE facilitated the setting up of NERC after being screened by the
Senate. The BPE provides technical and financial support to the commission
through the privatizations as detailed in chapter 2 as regard to electric power
reform framework in Nigeria.
NEW/AMENDED ACT
Electricity Act often provides the legal and regulatory framework; the legal
and regulatory framework was originally designed for state owned
Government regulated power utilities, with little or no provision for
private sector participation.
PRIVATIZATION
The ultimate objective of the FGN in electric power sector reform is to
improve infrastructure and access. The Governments policy thrust is
lxvi
anchored on the private sector which will drive investment and grow the
sector in the short medium and long term.
The privatization reform option is one that emphasizes infrastructural

improvement and not proceeds. In order for the FGN to actualize the
electric reform, the following strategies were preferred.
A. MANAGEMENT CONTRACT:
The Transmission company of Nigeria (TCN) Plc is one of the (18)
eighteen successor companies of PHCN, incorporated in Nov, 11
2005. The management contract is for 3 years and deliberately
designed to provide for skills and transfer of expertise to Nigerian
counterparts who will serve in deputy positions to the key
management staff of the management contractor. The essence of this
is to promote sustainability continuity and success for the company
when the duration of the management contract expires.
The management contract for (TCN) is currently engaged through the World
Bank by PHCN for transmission Development Project, funded under the
Nigeria Energy Development Programme. Upon evaluation of the
expression of interested bidders for TCN management, four bidders were
pre-qualified and request for proposal on Feb. 28 2007.
(1) ESB International Ireland
(2) Terna Rete Eletrik Nazionale, Italy
(3) Power Grid Corporation Ltd, India,
(4) Manitoba Hydro International, Canada.
B. CONCESSION
lxvii
This is the most preferred strategy for the electricity distribution companies
and some of the power station. This is because it allows investors to
undertake investment and to recoup them over a given period. It also gives
government the opportunity of continuously strengthening the networks
through additional investments and gives the required platform to address
attended political issues that may arise from privatization.
C. ASSETS SALE
This is mostly being adopted for the privatization of PHCN non-operational
assets located in Oji River, Ijora and Calabar. Owing to their moribund state,
the assets sale allows the investor the benefit of deciding how it intends to
turn around the moribund infrastructure.
D. CORE INVESTOR SALE:

This strategy may be applied in the privatization of certain power stations. It
is not however a widely acceptable method of privatizing utilities because of
the consequences of conferring right of outright acquisition on the investor.
4.4. IMPACT OF ELECTRIC POWER SECTOR REFORMS: ON

PRICE, TARIFF
Tariffs reform has been a key component of reform programs, typically

involving significant increases in tariffs brings them to cost-reflective levels
and often involving tariff rebalancing to reduce degree of cross-subsidization
in the industry.
The Labour Unions and the society, as the 70% of Nigerian are dominated
by low income earners, found it politically difficult to sustain tariff increases
lxviii
and have either rescinded. Tarrif reforms have tested the independence of
newly established regulators with several bowing to political pressures to
reduce tariffs.
Price reforms are intended to restore the financially viability of the industry,
and creates the basis for renewed investment infrastructure, including
distribution networks. The effect of this is naturally dependent on the utility
ability to collect revenue and maintain downward pressure on costs. As such
price reforms may be conditional on other reform measures that target
technical and managerial performance if they are effective. Tariff increase
will clearly have a negative impact on household and there is evidence of
most of the public switching to any alternative in the face of tariff increases.
Tariff reforms have reduced the level of subsidised consumption in order to

target the subsidy more effectively. In addition, prepayment metered
supplies have often proved popular with low- income as they allow more
careful control over energy expenditure. Furthermore, it must be noted that
with access rates of 10 to 20 percent, maintaining low tariffs benefits only
minority of the Nigerian population and inevitably subsides the wealthier
portion of the population as it is thus community that is more likely to have
electricity supply.
TARIFF REVIEW
Electricity tariffs do not cover PHCNs average cost of production in N10.00
N12.00 /KWH
GENERATION = N5.00 - N7.00

TRANSMISSION = N2.00
DISTRIBUTION = N3.00
lxix
Residential Consumers
- Residential tariffs vary from N1.20 to N4.00 for life line. Price
increases are preparatory to planned privatization
- Industrial consumer pays N6.50 - N8.50/kwh
(likely to increase by about 100%).
Impact on tariff increase appears to take place more rapidly and obviously,
tariff increase can quite possibly bring about straight forward move away
from electricity to other fuel alternatives.
Tariff can even act as a barrier to investment. This is because lifeline tariff
rate means that revenue from electrification project remaining below the
marginal cost of supply. Furthermore the National tariff structure implies
that distributors in the region with high electrification burden will fail to
recover the cost of supplying low income and rural customers. Consequently
the reform programme has failed to stimulate additional investment in
extending access.
The privatization of PHCN has also involved a commitment to investment in

electricity services in the (first 3 years) although the company has managed
to mobilize a large part of its investment obligations, investment targeted at
electrification have not materialized fully. In the situation where the
company has been unable to mobilize all the investment resources required.
It has clearly prioritized other needs over electrification. In this case, the
relationship between reform prices and investment in access has not
materialized as anticipated. Award of management contract has restored the
financial performance of the utility to a point where at least some investment
lxx
can be financed from loans or retained earnings. However, this is yet to lead
to a significant increase in the rate of new connections.
4.5 IMPACT OF ELECTRIC POWER SECTOR REFORM ON

QUALITY AND RELIATBILITY OF SUPPLY
This is another aspect the Nigeria electric power sector reform aim to
address. The distribution industry remains fragmented and is yet to be
restructured, quality and reliability of supply varies regionally and in a low
performance as can be seen in this chapter. Moreso, the public continue to
experience frequent outages and voltage drops.
The key focus and success measure of electric power sector reform is the
ability to attract IPPs into the industry. The climate for independent power
(IPP) deteriorated dramatically, several project of the industry on power
sector have suffered as a result, and have forced a reassessment in the
electric power sector. Where IPPs have been established, the cost of
production have proved higher than existing supplies, partly due to the effect
that inflation had on existing asset values and partly due to the cost of
capital facing the private investors.

ECONOMIC ACTIVITY
Most reform programmes have included measures to increase tariff to cost
reflection level. In these cases, the reflection or economic activity should be
expected to be negative. However, there is little evidence to suggest that
lxxi
price as a result of the reform has had a significant impact on economic
growth. Outside of every electricity intensive industries, industrial
willingness to pay is generally fairly high, given the level of other input
prices and high cost of unserved energy.
Most industries are more concerned about power reliability and quality than
price. Reform programmes that combine tariffs with improvement in supply
quality will thus mitigate the negative economic impact of increase in tariff.

SOCIAL SERVICES
Concern with the availability and quality or electricity supply to social
services has rarely been a prominent issue in the design and implementation
of sector reforms. The target of electrification has not been met as findings
have not been made available to support the electrification activity and the
social benefit has not been made significant.

PUBLIC FINANCES
Reducing the sectors dependence on public finances has been a key driver
of reforms. There has been a focus on shifting the investment burden away
from the public sector. Also where utilities have been dependent on
lxxii
government subsides; there has been an intention to remove this drain on
public resources.
It is clear that electrification itself cannot be fully financed by the utility

business itself, particularly rural electrification. Government of Nigeria is
expected to provide subsides for this purpose, and must have established
system to ensure that the subsidy is targeted at capital cost rather than
operating subsides.
Finally, the outcome of the electric power sector reform has been a change
in the financial relationship between government and utilities, rather than a
separation. Public finances are more targeted at specific interventions and
there is need for greater transparency in the allocation of resources.
CHAPTER FIVE
5.1 LESSONS LEARNT FOR THE FUTURE ON ELECTRIC POWER

SECTOR REFORM
A growing economy requires a massive energy to power it. From the
analysis, reforms were primarily designed to bridge short term generation
short falls and enhance the financial health of state owned power utilities.
The first lesson learnt is that reforms do not appear to have solved the
electric power sector problems with the exception of increased profitability
of utilities, the key issues that provided the impetus for reforms continue to
prevail long after reform have been implemented. This could be seen that the
lxxiii
generation capacity shortfalls still persist and several requisite reform
measures put in place have not guaranteed the desired results.
The second lesson is that private sector involvement in the power sector is
not the ultimate solution. Development in the management contract indicates
a significant degree of satisfaction.
5.2 CHALLENGES OF THE ELECTRIC POWER SECTOR REFORM

The following have been identified as critical challenges that will impact on
the implementation of the reforms:
(a) Lack of access to power stations and PHCN facilities due to labour
opposition to the reform.
(b) Vandalization of network systems and other PHCN assets.
(c) Subsidies and incentives to attract private investor are important for sector
sustenance and growth.
(d) Uncertainty in continuity of energy policies, politicking of the energy and
power sector.
(e) Uneven geographical location of power generation plants.
(f) Poverty and customers inability to pay an economic and appropriate
electricity tariff.
(g) Technical issues, high technical and commercial losses across the three
segment of electricity value chain.
(h) Environments.
5.3 FINDINGS
lxxiv
(1) Electrification of the rural areas is an important indicator of the electric
power sector sustainability. Rather it has either stagnated or declined
altogether. In urban areas, electric reforms appear to hold benefits than the
rural areas, the advent of independent power distributors appear to provide
an opportunity for electrification in urban.
(2) Reforms have led to the establishment of rural electrification funds and
boards, these developments have not helped to increase electrification level.
This is because the rural electrification funds and boards have not provided
effective and innovative mechanisms that would ensure they achieve their
objectives.
(3) It is also important to note that the involvement of IPPs have led to
aforementioned increase in tariffs, this is because the licenses and Power
Purchase Agreement (PPAs) issued to the IPPs appear to have a short time,
span leaving IPPs with no choice but to ensure that they recover their
investment cost and make attractive returns within limited time.
(4) The power system in the region have over the past years been overstretched
due to a shortfall in generation capacity to match giving demand. The
response in the unfolding crises has been to increase generation capacity by
allowing IPPs to the sector. In extreme cases where generation by IPPs has
still not been sufficient to meet demand, local shedding ensued.
(5) The electricity Regulatory Agencies has done little to ensure the
sustainability of the power sector. This is attributed to the weakness of the
regulatory agencies to enforce the electricity Act because the ability to
perform its duties has been compromised by its lack of the requisite
lxxv
independence as a result of politically motivated appointment of the
members of the respective agencies boards.
(6) Power sector reform appears to have marginalized local private investment
in the power sector. Current trends seem to indicate that in the medium term,
the government will be effectively handing over a significant share of the
electricity industry to non-material operators. In the long-term, this may be
an unsustainable arrangement. In part the IPPs have mainly been hampered
by the emphasis on large scale investment.
RECOMMENDATIONS
To achieve the vision 2020 goal of making Nigeria one of the twenty largest
economies in the world, electricity generation will have to increase from the
present level of 3650MW to about 45000MW. To achieve this, the following
should be done:
(1) Incorporate off grid policies and legislation in power sector reform: The
focus of electric Power Sector Reform is understandably on the main grid
utilities. Rural electrification grid versus off-grid planning. Concession areas
etc. Power Sector Reform in general opens space for private sector
participation. Legislation should create clear rules for off-grid or mini-grid
concessions which should preferably be awarded on a competitive basis.
There is also need for equitable arrangement around capital subsidies and
lifeline tariff grid and off-grid or mini-grid systems.
(2) The most effective measures of the reform is ensuring the independence of
regulatory agencies. This could be achieved by enhancing the re-
lxxvi
presentation among the board members. For example, having representative
of various segments of consumers including rural on the board of regulatory
agency could ensure that the plight of the disadvantaged is heard especially
with respect to electrification and review of electric tariffs.
(3) Issuing licenses and Power Purchase Agreements (PPAs) covering a longer
period, this can ensure that setting price of electricity is moderated. This is
essentially because long-time agreement allow for sufficient time for the
investor to pay off project financing debts as well as adequate amortization
period for the equipment.
(4) Design plausible and realistic programs: power Sector reform arbitrations
need to be realistic, both in scope and content. It is not always possible to
transfer ideologies or practice elsewhere to the environment in another
country. Competition and privatization varies from country to country as
well as views regarding this.
(5) Electrification challenges: High cost of grid extension is identified as a

barrier of rural electrification. An immediate option to lower the cost of rural
electrification is the use of proven low cost electrification option such as
wind, solar DV etc. another option is the promotion of decentralized
electricity generation in rural areas using bio-gas based cogeneration and
where applicable geothermal. This would greatly reduce the need the
transmission has to transverse long distance and sometimes difficult terrain.
Special funding mechanism need to be put in place (system limes fiscal

allocation, donor funds), consolidated in a natural electrification fund lucked
to electrification playing and fund allocation process. Transparency and
lxxvii
accountability in the allocation of these funds is crucial, as there are far too
many instances where funds have either been directed or allocation
politically done to favour constituencies.
(6) Leveling the playing field; the regulatory agencies could promote proven
environmental friend by electricity generation options through setting of
spiral targets as well as providing for preferential tariffs for their electricity
sales. In addition regulatory agencies could provide attractive incentives to
investors willing to install electricity generation plan based on these energy
sources.
CONCLUSION
The challenges of reforming the electric power sector to make it deliver
available power supply, to the economy is enumerable but there is need to be
hopeful as the Multi Year Tariff Order (MYTO) has been approved by the
government, a wake-up call has been made on the institutional structure like
(NERC) to take the bull by the horn on the provision and sustenance of the
realistic policies to achieve the vision 202020.
As a country that is at the echelon of subdivision competition with other

countries in the world. The government should also faithfully implement the
recommendations of Electric Power Sector Reform Committee. There is
need for a huge rehabilitation work to be done in some of the power plants
with a view to sustaining and improving availability of electricity supply.
These empirical results have policy implications for electricity reformers in
developing countries. Like Pollitt (1997) the study finds that competition is
lxxviii
the most reliable driver of economic benefits. In the light of the benefits
associated with competition, NERC should introduce measures conducive to
promoting liberalized electricity markets. When privatising industries where
significant monopoly powers remain, emphasis should also focus on
designing and implementing an effective
regulatory framework. The competition variable is significant with the
expected sign throughout, except on the most politically sensitive issue of
residential prices and for capacity utilisation, where liberalisation may lead
to a decline in average capacity usage. Because competition is confirmed as
the most reliable means of improving performance, this suggests that the use
in a number of developing countries of exclusivity periods granted to new
generators and long-term purchase contracts for IPPs, arranged so as to
stimulate investment, may be unwise. Such measures may dim efficiency
incentives and reduce economic performance by removing the incentive of
competition.
This Questionnaire is on assessing the Electric Power reform. Participation in the

research will not have any implication on you. We would be glad if you could
supply us with the needed information. Thank you.
SECTION A: SOCIO-DEMOGRAPHIC VARIABLE
A1. Sex Male Female
lxxix
A2. Age
A3. Department__________________ A4.
Rank___________________
A5.Division/Unit____________________
SECTION B: COMPLIANCE WITH REFORM

Scale: Excellent, Good, Fair, Poor. (Tick only one option)
NO QUESTION Excellent Good Fair Poor
1. How is your opinion about electric supply

been, during the pre- reform era?
2. To what extent has reform played in
improving the access to electricity to the
society?
3. To what extent are the targeted and
transparent subsidies put in place to help
the investor
4. To what extent has the incentive issued by
the regulators reduced the price of
electricity?
5. How has the incumbent invested in the
power during and after reform?
SECTION B: EXTENT OF AVAILABILTIY
lxxx
For the Stakeholder, to what extent will the reform affect your productivity,
business and otherwise? Indicate by grading it to show the extent of your support
for the following factors.
Scale: Excellent, Good, Fair, Poor (Tick only one option)
1. How has electricity supply been during the pre-

reform era?
2. How would you grade the reform before reform?
3. How would you grade reform after reform?
How has the energy cost of doing business
4. changed?
What is your opinion about privatization in the
5. provision of electricity?
Public sector finance privatization receipt, how has
6. this receipt been used to realize fund for the
increase expenditure on electrical programme?
7. To what extent does the investor engage in the
generation of electricity?
8. How would you rate and rank the investors?
Consider the on-going reform process, has PHCN
9. increased in its revenue due to competition?
To what extent has competition led to the increase
10. in the efficiency and effectiveness in the power
generation?
What is the extent of tariff structure and moves to
11. cost reflectivity?
Do the new agents emerge that invest in access to
12. electricity power supply?
Do reforms include the establishment of any
13. special access mechanism by the regulators?
14. How efficient is the services of PHCN officials as

regards to customers complain after the reform?
15. How is reform on social services?
lxxxi
This Questionnaire is on assessing the Electric Power reform. Participation in the
research will not have any implication on you. We would be glad if you could
supply us with the needed information. Thank you.
SECTION A: SOCIO-DEMOGRAPHIC VARIABLE
A1. Sex Male Female
A2. Age
A3. Department__________________ A4. Rank___________________
A5.Division/Unit____________________
SECTION B: COMPLIANCE WITH REFORM
Scale: Excellent, Good, Fair, and Poor. (Tick only one option)
1. How is your opinion about electric supply

been, during the pre- reform era?
2. To what extent has reform played in
improving the access to electricity to the
society?
3. To what extent are the targeted and
transparent subsidies put in place to help the
investor?
4. To what extent has the incentive issued by
the regulators reduced the price of
electricity?
5. How has the incumbent invested in the power
during and after reform?
lxxxii
SECTION B: COMPLIANCE WITH THE ABAILABILITY
Scale: Excellent, Good, Fair, Poor (Tick only one option)
1. How has the electricity supply been during

the pre-reform era?
2. Does your organization depend on electric
power supply for their operations?
3. Have reform improve access to electricity
to the society?
4. Have reform improve the quality of
electricity supply?
5. To what extent has the price changes have
resulted from the sector reform?
Do you think that chances are given to the
6. (IPP) in the provision of power supply for
business?
How has the (IPP) impact on the power
7. supply generation felt and rated?
Has privatization led to higher price to the
8. residential consumer and lower price to the
industry?
9. Have electrification programme expanded
the access to small business?
lxxxiii
BIBLIOGRAPHY
1. Adamantiades, A G et al(1995).Power Sector Reform in Developing Countries

and the Role of World Bank. 16th World Congress of Energy Council,
Tokyo, World Bank Industry and Energy Department.
2. Ademikinju A, (2005): Analysis of the cost of Infrastructure Failures in a
Developing Economy. A case of the Electricity Sector in Nigeria; AERC
Nairobi.
3. Alix Clark, Mark Davis, Auston Eberhard, Katharine Gratwick & Njeri
Wamuhonya (2005).Power Sector Reform in Africa: Assessing The Impact
on Poor People.
4. Bacon R. (1995). Privatization and Reform in Global Electricity Supply
Industry. Annual Review of Energy and Enviroment 20:119-43.
5. Bacon, R. W. & Bestsant-Jones (2002) Global Electric Power Reform
Privatsation and Liberalization of the Electric Power Industry in Developing
Countries.
6. Besant, Jones et al (1993). Power Supply in Developing Countries: Will
Reform Work? Industry and Energy Department Occasional paper No. 1,
World Bank.
7. Byrne, J and Mun, Y (2003). Rethinking Reform in the Electricity Sector:
Power Liberalization or Energy Transformation.
lxxxiv
8. Clark et al (2005) Power Sector Reform in Africa: Assessing The Impact on
Poor People.
9. Davis, M & Ward, S. (1995). Household Energy Use Pattern in Rural Areas;
the Effect of Access to Electricity. REIPERA. project. Energy and
Development Research Centre. University of Cape Town.
10. Economic Organisation of West Africa State ECOWAS (2005). White paper
for a Regional Policy for Increasing ACCESS TO Energy Services for
Population in Rural and Peri-Urban Areas in order to Achieve the
Millennium Development Goals.
11. Eberhard, A. (2007).The Political Economy of Power Sector Reform on Sub-
Saharan Africa.
12. Fatima Balarabe Ibrahim. Hon Minister for State for Energy. PHCN not to
Blame for The Poor Power Performance of the Power Sector; Quarterly
Journal of Delta Electric Power business Unit.
13. Hilda, Dubrovsky and Crescencia Maurer. (2001). Reform of Electric Power
Sector in Developing Countries. Institute of Energy Economic Baroloche
foundation World Resources Institute.
14. Ikeme, J Nigerias Electric Power Sector Reform: Developing World Built
Environment Research Unit De Montfort University, The gateway, Lecice
Ster LE 9BH, ROYAUME UNI.
15. International energy Agency IEA (2002). World Energy Outlook 2003; Energy
and Poverty IEA Paris.
16. Joskow, P. L. (2003). Electricity Sector Restructuring and Competition:
Lesson Learned, Cambridge, Centre for Energy and Environmental Policy
Research, MIT
17. Karekezi, S, Mapako, M and Teffarra, M (200). Energy Policy Journal
Speacial Issue Vol 30.
lxxxv
18. Kareke, S. et al (2005) Engendering Power Sector Policy in Eastern and
Southern Africa.
19. National Electricity Regulation Commission (2005). Annnual Report

20. Newbery, D. M. (2001).Privatisation, Restructuring and Regulation of Network
Utilities. Cambridge, the MIT Press.
21. Oke, C. A. (2008). Resuscitating and Sustaining the Nigerian Power Sector:
Paper presented to Nigeria Association of Energy Economics (NAEE) at the
NNPC Towers 14th August (2008).
22. Patterson, W. (1999). Transforming Electricity; London Royal Institute of
International Affairs
23. Power Sector Report (2008): Obtained from Online.
24. Score Card for Energy Reform in Developing Countries. Finance Private
Sector and Infrastructure, Network the World Bank Group
25. Sotkeiwics, P. (2006). Frontiers in Managing Reform and Regulation of
Electric Sector in Africa. Review of Selected International Experiences in
Electricity Reform. Graduate School of Business University of Cape Town.
26. Underpowered; The State of Power Sector in Sub-Saharan African, African
Infrastructure Diagnostic, Background Paper 6, Washington D.C., World
Bank.
lxxxvi
FIGURES:
Fig 1: = Power development chart
2. = Historical funding levels by governments for PHCN
operation
3. = TCN 330KV Transmissions grid as at today.
lxxxvii
lxxxviii
lxxxix
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NWALUTU ALOY NNAM

ASSESSMENT OF POWER REFORM

A THESIS SUBMITTED TO THE DEPARTMENT OF MANAGMENT, FACULTY OF

Digitally Signed by Webmasters Name

This project is dedicated to my mother, Madam Chieke Nwalutu.

NWALUTU ALOY NNAM, a post graduate student of the department of management

whose Registration Number MBA/2000/OA/0394 has satisfactorily completed in

Business Administration (MBA) Degree in Management by the Department

of Management, University of Nigeria Enugu Campus.

made this work a reality. In that vien my gratitude goes to my project

towards successful completion of this project.

This acknowledgment is not complete without mentioning of my deep

for me to realize my quest for further education.

In the preposition to stimulate a genuine dynamic of development and to rise

In effort to extend access to electricity to the communities and the nation at

Problems in the organization and management of electric power sector in

1.2 STATEMENT OF THE PROBLEM

There is no gain saying that energy is a critical and strategic infrastructure

Furthermore, previous attempts to improve on the state and nature of electric

In reality, there was consensus on the nature of problems plaguing the

The democratic elected government since 1999 has demonstrated its

1.3 OBJECTIVES OF THE STUDY

1. Examine institutional framework of parts sector reforms initiatives.

1. How is the electricity supply during the pre-reform era

1.5 RESEARCH HYPOTHESES

1.6 SIGNIFICANCE OF THE STUDY

1.8 LIMITATIONS OF THE STUDY

A further development was establishment of Electricity Corporation of

Another major development in the power sector was establishment of

As at 1998, NEPA ceased to have monopoly of electricity generation,

(i) Absence of power system planning.

(ii) Failure and overloading distribution network

(iii) High technical and non-technical losses

(iv) Uneconomic traffic structures

(v) Inaccurate billing and poor revenue collection

(vi) Inadequate metering leading to non-payment and theft.

According to concise Oxford Dictionary (2001) reform is to make change in

From Brainy quotes Reform is defined as:

2.1 POWER HISTORY IN BRIEF

Secondly, with regard to public ownership of the generation component, the

Thirdly, development of information and communication technologies

2.2 STATUS OF POWER SECTOR REFORM

Independent Power Producers:

2.3 ELEMENTS OF REFORM

2.4 INTERNATIONAL AND NATIONAL CONTENT OF REFORM

Development or proceeds from the reforms on various sectors, would

To take full advantages of this change, developing countries such as Nigeria

A first step in this direction was to promote or facilitate private investment

2.7 RATIONAL FOR ELECTRIC POWER REFORM

2.8 THE NIGERIA ELECTRIC POWER SECTOR

The share of self electricity generated in total electricity generated in Nigeria

Fig. 2 shows the historical funding levels by government for PHCN

Source Makoju (2007) citied in Adegbuludla and Adenikinju (2008).

As at 2004 NEPA had an installed capacity of 5906MW and with the

By the end of 2008 there are up to 12 Numbers power stations being

TABLE 2 Existing Power Stations

S/N POWER STATION INSTALLED YEAR

Source: PHCN Annual Technical Report

PLANTS SITUATION AS AT APRIL 2008

S/N POWER STATION SITUATION

2. Delta Gas Built in 4 Phases from 1966, terminal constraints

3. Sapele Gas/System Overhauls not carried out due to lack of funding.

4. Afam Gas The Station is only capable of producing

7. Kainji Hydro Some machines need complete refitting