The World Bank has stated that Nigeria can kick-start its economic growth by reforming the power sector, citing that the present power policies of the Federal Government need to be deepened through a combination of upstream and downstream interventions.
The World Bank made this remark in its bi-annual Nigerian Development Update, titled: “Resilience through reforms”, a report published twice yearly. The Bank disclosed that Nigeria’s revenue-side challenges may be diffused, but on the spending side, the electricity sector is a clear priority for reforms due to an estimated 43% of Nigeria’s population (85 million people) lacking access to an electricity grid – the largest energy-access deficit in the world.
“Privatization efforts have not delivered their intended outcomes, and the power sector is now under severe stress. Distribution companies report aggregate technical, commercial, and collection losses of about 50%, far above the 15% benchmark for international good practice,” the Bank warned.
The report stated that the power inefficiencies, combined with uneven reforms of tariffs, have led to a breakdown in the sector’s payment chain. It praised the FG’s efforts in recognizing power sector underperformance threat to Nigeria’s post-pandemic recovery, through the implementation of the Power Sector Recovery Programme (PSRP) and the National Electrification Project (NEP) to improve sector performance and increase access to reliable electricity throughout the country.
“For example, in November 2020, the government raised electricity tariffs from 56 to 80 percent of the cost while moving to a regime of service-based tariffs and ensuring that the increases in average tariffs do not adversely impact those poor and low-income households that do have access to grid electricity. To complement the tariff reforms, the government issued regulations to stop arbitrary estimated billing, accelerate mass metering, and enforce payment discipline for the distribution companies—all actions to improve the financial sustainability of the sector,” the Bank stated.
The World Bank added that there is a need to deepen the efforts made by the FG through a combination of financial and policy interventions upstream and technical, operational, and investment interventions downstream.
Nigeria launched the Solar Power Naija programme earlier this year, which is under the Economic Sustainability Plan (ESP) to deliver 5 million connections to off-grid communities.
This initiative also includes about N140 Billion which will be provided in concessionary financing from the Central Bank of Nigeria and the commercial banks for off-grid developers to roll out mini-grids and solar home systems to provide electricity to locations across the country.