Governance and Transparency in Nigeria’s Power Sector
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The unbundling and privatisation of the state-owned Power Holding Company of Nigeria (PHCN) led to the creation of 11 distribution companies (DISCOs), six generation companies (GENCOs), and a transmission company, marking a new era of better governance and transparency.
Closing the gap in Nigeria’s power sector is more than just about securing enough supply. For a sector that has undergone significant reforms in the past 25 years, strong governance plays a crucial role in overcoming the country’s power issues.
The unbundling and privatisation of the state-owned Power Holding Company of Nigeria (PHCN) led to the creation of 11 distribution companies (DISCOs), six generation companies (GENCOs), and a transmission company, marking a new era of better governance and transparency. Today, the country’s power sector comprises several key actors, including state-owned companies, private entities, and regulatory agencies that work to sustain Nigeria’s power reforms.
Key Actors in Nigeria’s Power Sector
The Federal Ministry of Power oversees policy formulation and provides overall direction to other agencies within the power sector. Meanwhile, the Nigerian Electricity Regulatory Commission (NERC) acts as an independent regulator. It was established by the Electric Power Sector Reform Act of 2005 (now repealed by the Electricity Act of 2023). The commission’s roles include licensing operators, determining operating codes and standards, establishing customer rights and obligations, and setting cost-reflective industry tariffs.
In the country, there’s also the Energy Commission of Nigeria (ECN), which coordinates national energy policies; the Rural Electrification Agency (REA), which promotes and facilitates access to electricity in rural and semi-urban areas; and the Nigerian Electricity Management Services Agency (NEMSA), which enforces technical standards and regulations through inspections, testing, and certification of electrical installations.
Among Nigeria’s state-owned power companies is the Transmission Company of Nigeria (TCN), which manages the electricity transmission network. On the other hand, the Nigerian Bulk Electricity Trading (NBET) functions as the bulk trader in the electricity market. Meanwhile, the Gas Aggregation Company of Nigeria (GACN) is responsible for gas allocation for domestic use and other related tasks.
The power sector also includes private companies, such as GENCOs and DISCOs. The former generates electricity while the latter delivers electricity to end-users. Independent power producers (IPPs) are entities contracted to produce power at designated times, supported by power purchase agreements (PPAs).
Enhancing Transparency and Accountability
Transparency — or the lack thereof — has been a significant bottleneck in Nigeria’s power sector. Unclear procurement processes and tariff structures and inadequate disclosure of financial transactions are issues that have eroded public trust.
To overcome this, recent years have seen concerted efforts to reform governance structures within the power sector. The Power Sector Recovery Program (PSRP), launched in 2017, is a landmark program that aims to restore financial viability, enhance the sector’s institutional framework, and increase transparency.
Additionally, TCN, the country’s transmission firm, has established an Anti-Corruption and Transparency Unit. In November 2023 last year, TCN Managing Director Sule Abdulaziz unveiled a Preventive Guide Handbook, which will serve as a crucial tool for proactively fighting corruption.
Over the past years, global organisations have also stepped in to boost transparency in Nigeria’s power sector. For instance, MacArthur Foundation granted the Association of Nigerian Electricity Distributors (ANED) $680,000 between 2016 and 2019. With this award, ANED — the association of privatised DISCOs in Nigeria — launched initiatives to educate the public, policymakers, and the media about the power sector’s privatisation, support rural electrification cooperatives, and improve customer service to enhance accountability and reduce corruption.
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