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A power plant in Nigeria

Why electricity privatisation is unlikely to succeed in Nigeria

The privatisation of power supply in Nigeria, which was essentially about breaking up the previous state-owned monopoly into generation, transmission and distribution companies, and then selling them off to the private sector, is not providing the expected benefits, and very unlikely to do so.

A major player in the industry, Joshua Mukan, the CEO of William Duncan Hydro-Electric Power Limited, revealed the key to failure in an interview on a Lagos TV channel this morning.

He said that the differences between electricity supply and mobile telephony, which has exploded in Nigeria in the last 15 years, are in infrastructure required and the amount of expenditure.

Mobile phone companies only require base stations and then users’ phones would just pick up signals from the masts. Electricity supply is a different ball game. A lot of investment in infrastructure, power lines, cables, etc, is required to connect customers to the national grid.

The investment necessary means that the “revenue collection system” is not profitable for the electricity distribution companies (Discos).

The other issue not raised by Mukan is that those companies borrow from banks at comparatively high interest rates. The cost of borrowing and infrastructure would have to be transferred to the customers. This is why the companies keep pressing for increases in tariffs.

In the UK, when power supply was privatised, bills went up 300-400%. The energy companies can get away with it in the UK, with average pay at £25,000 a year. The majority of Nigerians would not be able to afford the sort of bills private companies need to charge to make electricity profitable.

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