A LEGAL APPRAISAL OF THE ELECTRIC POWER SECTOR REFORMS IN NIGERIA

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ABSTRACT

Nigeria’s electric power sector requires substantial reform if the country’s
economic development and poverty alleviation programme is to be realized.
Currently, the country faces serious energy crisis due to declining electricity
generation from domestic power plants which are basically dilapidated, obsolete,
and in an appalling state of disrepair, reflecting the poor maintenance culture in
the country and gross inefficiency of the public utility provider. The government
encouraged the private sectors to invest into the electricity industry so that, the
monopoly created by the NEPA could be demolished and at the same time, some
independent power producers could enter into the electricity sector. This
understanding is behind the introduction of the Power Sector Reform Act 2005
which was recently initiated by the Nigerian government with the goal of
privatizing the National Electric Power monopoly, NEPA.
Age long principles of democratic governance, of sovereignty belonging to the
people, the people’s entitlement to participate in their governance and most
importantly from the point of view of the topic of this paper, that security and the
welfare of the people are the principal aim of government, form the theme of the
provisions of section 13 of the 1999 Constitution.
In Section 16 of the same Constitution, the second aim of government of
ensuring the welfare of the citizens seems to be pointedly enjoined as the state is
mandated therein to harness national resources and promote national prosperity
and an efficient, dynamic and self-reliant economy which it shall control to secure
maximum welfare, freedom and happiness of the citizens and without truncating
the rights of individuals to participate in the major economic areas.
Building on the analysis of the introduction of the Reform Act, this long essay
intends to present the central issues that led to d enactment of the Reform Act, the
key objectives of the Reform Act. This includes the legal reforms, the Act, the
essential sections, licenses and tariffs, tariff regulation, consumer’s protection, the
impact of the reform, the shortcomings of the reform, the innovations and the
consequence of the reform.
This steady decline in the Nigeria Electric Power Sector has led to a near
complete failure of the system at the onset of the present civilian regime in 1999.
The Reform program also led to the establishment of the Nigerian Electricity
Regulatory Commission in 2005 which was made responsible for the regulation
of tariffs. This long essay will therefore also examine the role of NERC as a
sector regulatorS and its impact so far in establishing a licensing regime that will
be attractive to potential investors.
As Nigeria implements its national utility privatization program, it is hoped that
this legal review will benefit policy makers and emerging managers and providers
of electric service in the country.

TABLE OF CONTENTS
COVER PAGE ……………………………………………………………………..i
CERTIFICATION PAGE ………………………………………………………..ii
ABSTRACT ……………………………………………………………………….iii
TABLE OF CONTENTS………………………………………………………………………..iv
DEDICATION …………………………………………………………………….x
ACKNOWLEDGMENT …………………………………………………………xi
TABLE OF STATUTES …………………………………………………………xii
LIST OF ABBREVIATIONS ……………………………………………………xiii
CHAPTER 1
GENERAL INTRODUCTION
1.0.0: INTRODUCTION………………………………………………….1
1.1.0: BACKGROUND TO THE STUDY…………………………….3
1.2.0: OBJECTIVES OF THE STUDY……………………………….3
1.3.0: FOCUS OF THE STUDY……………………………………….4
1.4.0: SCOPE OF THE STUDY………………………………………………….4
1.5.0: METHODOLOGY OF THE STUDY.………………………….4
1.6.0: LITERATURE REVIEW ……………………………………….5
1.7.0: DEFINITION OF TERMS…………………………………………………7
1.8.0: CONCLUSION…………………………………………………………………9
CHAPTER 2
EVOLUTION OF THE POWER SECTOR AND PRIVATIZATION
2.0.0: INTRODUCTION………………………………………………………….10
2.1.0: DISCOVERY OF ELECTRICITY…………………………………….11
2.2.0: HISTORY OF THE POWER SECTOR………………………………….14
2.3.0: PRIVATIZATION……………………………………..…………………..19
2.3.1.0: HISTORICAL PERSPECTIVE TO PRIVATIZATION…………….20
2.3.2.0: ADVANTAGES AND DISADVANTAGES OF
PRIVATIZATION……………………………………………………………….24
2.3.3.0: PROBLEMS AND CHALLENGES OF PRIVATIZATION……26
2.3.4.0: PRIVATIZATION CONSIDERATION…………………………..27
2.4.0: CONCLUSION…………………………………………………………….29
CHAPTER 3
POWER SECTOR REFORM IN NIGERIA
3.0.0: INTRODUCTION…………………………………………………………30
3.1.0: IMPACT OF THE POWER SECTOR REFORM ON
ELECTRICITY…………………………………………………………………… 34
3.2.0: PROPOSED REFORM…………………………………………………36
3.3.0: CHALLENGES AND OPPORTUNITIES ……..…………………36
3.3.1.0: ECONOMIC AND SOCIAL…………………..….………………..38
3.3.2.0: POLITICAL ISSUES………………………………………………38
3.3.3.0: TECHNICAL CHALLENGES………………..…………………38
3.3.4.0: ENVIRONMENTAL FACTORS……………………………………..39
3.4.0: OPPORTUNITIES………………………………………………………40
3.4.1.0: EFFICIENCY AND RELIABILITY OF SERVICE…………………..41
3.4.2.0: INVESTMENT OPPORTUNITIES……………………………………42
3.4.3.0: EMPLOYMENT OPPORTUNITIES………………………………….42
3.4.4.0:TRANSFER OF TECHNICAL MANPOWER………………………………43
3.4.5.0: ENCOURAGEMENT OF RESEARCH…………………………………43
3.5.0: RECOMMENDATIONS…………………………………………………44
3.6.0: CONCLUSION…………………………………………………………………45
CHAPTER 4
STATUTORY REGULATORY SCHEME FOR THE POWER SECTOR
REFORM
4.0.0:
INTRODUCTION………………………………………………………………..47
4.1.0: ELECTRIC POWER SECTOR REFORM ACT 2005.………………….48
4.2.0: INNOVATIONS OF THE ACT ………………………………………………50
4.2.1.0: FORMATION OF INITIAL AND SUCCESSOR COMPANIES…..51
4.2.2.0: DEVELOPMENT OF A COMPETITIVE ELECTRICITY
MARKET……………………………………………………………………………………52
4.2.3.0: ACQUISITION OF LAND AND ACCESS RIGHTS……………………53
4.2.3.1.0: CONDITIONS FOR LAND ACQUISITION……………………..…57
4.2.3.2.0: ACQUISITION OF ACCESS RIGHTS………………………………60
4.2.3.3.0: PROTECTION OF LAND AND ACCESS RIGHTS.……………60
4.3.0: NATIONAL ELECTRIC REGULATORY COMMISSION………61
4.3.1.0: STRUCTURE OF THE NERC………………………..……………62
4.3.2.0: GOALS AND OBJECTIVES OF THE NERC ……………………64
4.3.3.0: LICENSING BY THE NERC…………………………….………..67
4.3.3.1: INTERIM LICENSES…………………………………….…………67
4.3.3.2.: REGULAR LICENSES……………………………………………….68
4.3.3.3: CHALLENGES OF LICENSING……………………..…………71
4.4.0: EXTENT OF THE ACT………………………………………………73
4.5.0: CONCLUSION ………………………………….……………………73
CHAPTER 5
GENERAL CONCLUSION
5.0.0: CONCLUSION…………………………………………………………..75
5.1.0: RECOMMENDATION………………………………………………….76
BIBLIOGRAPHY
ARTICLES IN JOURNALS………………………………………………………82
ARTICLES ON THE INTERNET…………………………………………….82
BOOKS…………………………………………………………………………………………………91
NEWSPAPER REPORTS………………………………….…………………91
NEWSPAPER REPORTS ON THE INTERNET……………………………………..91
PAPERS PRESENTED AT CONFERENCES, WORKSHOPS
AND SEMINARS………………………………………………………………………………….92
REPORTS AND OFFICIAL DOCUMENTS……………………………………92
REPORTS AND OFFICIAL DOCUMENTS ON THE INTERNET……….92

CHAPTER 1
GENERAL INTRODUCTION
1.0.0: INTRODUCTION
Regular power supply is the hallmark of a developed economy. For the economy
of any nation to grow, the country must invest heavily in all the sectors including
social institutions, agriculture, healthcare, good network of roads, efficient
transportation system, reliable power sector and must tame financial instability.
Nigeria has over the years witnessed a slow steady decline in the power sector
which has led to a near complete failure of the system at the onset of the civilian
regime in 1999. Every person living in Nigeria has one or two stories to tell about
the unreliability of the Nigerian power sector, is it the housewife who looks on
dejectedly as she sees the food she has painstakingly prepared turn bad due to
inadequate power supply, or the students’ frustration and disappointment as they
read overnight with candles in preparation for an examination, or the upheaval in
the hospital as a result of the power failure during a surgical operation, or the
incessant hum of generators that accompanies you everywhere you go to mention
just a few.
A nation whose energy need is epileptic in supply prolongs her development and
risks losing potential investors. After 50 years of independence, Nigeria, a country
of over 140 million people and richly endowed with various sources of energy,
crude oil, natural gas, coal, hydropower, solar and wind etc is still mired in the dark. Poor electricity supply has been a serious problem in Nigeria. And despite
the huge amount of money said to have been expended by successive
administrations to revamp the power sector, there is no evident or obvious change
as not much seems to have been achieved as the country still witnesses frequent
and persistent power outages.
While businesses crumble daily owing to this long running problem of power
supply with manufacturing companies spending so much to generate own power
supply with the costs eating into profits, generator dealers are the beneficiaries of
the rots and decays in the power sector as virtually every business in the country
patronizes them.
Restructuring therefore necessitates changing the overall structure of the
electricity industry. It involves mainly the separation of the competitive from the
monopolistic components of the industry such as generation versus transmission;
distribution versus supply of electricity, transmission and distribution are
considered natural monopolies, while generation and supply are highly
competitive business ventures.
This long essay is however targeted towards examining how and why the power
sector has gotten to this level of decadence, what has been done so far and the
challenges ahead. The project would be restricted to the legal aspects of the power
sector reform program in Nigeria.
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