Power Sector Reform in Nigeria: Institutional Challenges and Prospects for Effective Performance

Abstract

The power sector reform in Nigeria is yet to produce the desired result. The privatization of Power Holding Company of Nigeria (PHCN) which is the most integral and visible component of the reform has not improved power supply. Power outage is still persistent and there are no signs that power supply would improve in the nearest future. The failure of privatization to restore efficiency in the power sector and to engender constant electric power has cast doubts on the viability of the policy. This paper probes the failure of privatization to improve power delivery vis-vis the position of the privatization advocates who had argued that the transfer of ownership and management of the power sector from government to private investors would not only engender competition and efficiency, but also serve as the antidote to mismanagement and corruption that have been the recurring features of the sector over the years. Using secondary data and qualitative methodology, the paper argues that corruption and inefficiency have persisted in the post-privatization era, and that the power sector reform is deficient because it failed to take cognizance of certain institutional challenges such as the inability of the security agencies to stop vandalisation of power facilities like power cables, transformers, gas pipelines, etc, and acts of sabotage by vested interests like diesel and generator dealers. These challenges are as a result of institutional decay rather than the nature of ownership of the power sector. Hence, privatization alone cannot solve the prevailing power deficit crisis in the country. The paper also argues that the success story of deregulation in the telecom sector which is often cited by government officials and privatization advocates to advance privatization policy and which partly informed the privatization of PHCN, would not necessarily replicate in the power sector because of its inherent monopoly. Privatization of PHCN may have removed the national monopoly once enjoyed by NEPA and its successor - PHCN, but it has also created another kind of monopoly private monopoly. That is to say, privatization only transformed the monopoly, it has not eliminated it. In conclusion, the paper submits that more than any other factor, dysfunctional institutions are mainly responsible for the persistent power crisis in the country. And until these institutional dysfunctions are properly tackled, they will continue to hinder efforts aimed at ensuring effective performance and improved power delivery, irrespective of whether or not the power sector is owned and managed by the government or private investors.