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Sonny Iroche

Need to concession or privatize the Transmission Company of Nigeria By Sonny Iroche

December 12, 2023

The power grid collapse in Nigeria has been a persistent issue that has hindered the country’s development and economic growth. The Transmission Company of Nigeria (TCN) which is responsible for transmitting electricity from the Generation Companies (GenCos) to the Distribution Companies (DisCos), but it has been widely acknowledged that the TCN is one of the Achilles heel of the power sector. Although there are other challenges hindering the effectiveness of the power sector in Nigeria, such as dearth of investment in the sector as a result of financial insolvency, which is traceable to the regime of non cost reflective tariff, and the subsidy in the sector, which has not been adequately addressed.

It is therefore, very critical, for me as a player in the sector, having served as an Executive Director of Finance and Accounts in the TCN to catalog, as I have done in some of my past publications, some of the challenges faced by the TCN and propose solutions to address the frequent power grid collapse in Nigeria.

The TCN’s inefficiency and lack of investment have resulted in frequent power grid collapses in Nigeria. A major solution to address the myriad of problems faced by the TCN and invariably the power sector is to either privatize or concession the company.
The privatization of the TCN would be a necessary step to ensure that financially and technologically capable bidders take over its operations. Previous attempts to improve the functioning of the TCN, such as contracting Manitoba Hydroelectric International (MHI), have failed, (a subject for discussion on another day).

The licenses issued in 2014 to unbundle the TCN into two separate entities, the Transmission Service Provider (TSP) and Independent Systems Operator (ISO), which is the international best practice have also not been implemented. Curiously, the Presidential Power Initiative (PPI) signed in 2019 between the Federal Government of Nigeria (FGN) and Siemens AG appears to facing bureaucratic hurdles, as the power transmission and distribution targets set by the PPI, have not been achieved.

Privatizing or decentralizing the TCN would attract competent private sector investment and ensure the efficient transmission of electricity, ultimately reducing the occurrence of national grid collapses.
It is not enough to reel out the challenges that have bedeviled the power sector since the days of its evolution from ECN, NEPA, PHCN and to the unbundling the sector to GenCos, DisCos and TCN in 2005. It is equally important to proffer some solutions and benefits that can be derived from their implementation, as follows:

First is the Privatization of the TCN:
Privatizing the TCN would allow financially and technologically capable bidders to take over its operations. This would bring in much-needed investment and expertise to improve the efficiency and reliability of the transmission system. The 2013 privatization of the GenCos and DisCos can serve as a model, but the privatization of the TCN should be carried out differently to avoid the mistakes of the past. The government should ensure that the bidding process is transparent and that only qualified and competent companies are selected to take over the TCN.

Secondly, the Decentralization of the TCN:
Another option to address the frequent power grid collapse is to decentralize the TCN along the existing 10 regions in Nigeria. This would allow for more localized management and decision-making, leading to better coordination and faster response to issues. Each region could have its own transmission service provider, responsible for the transmission of electricity within that region. This would reduce the burden on the central TCN and improve the overall efficiency of the transmission system.

Thirdly would be; Attracting private sector investment:
Regardless of whether the TCN is privatized or decentralized, attracting private sector investment is crucial. The power sector in Nigeria requires significant financial resources to upgrade and expand the transmission infrastructure. The government should create a conducive investment environment by providing incentives, such as tax breaks and guarantees, to encourage private sector participation. Additionally, regulatory reforms should be implemented to ensure a level playing field for all investors and to protect their interests.

Success of privatization in other sectors:
The success of privatization in other sectors, such as telecommunications and banking, demonstrates the potential benefits of privatizing the TCN. These sectors have seen significant improvements in efficiency, service quality, and customer satisfaction after being privatized. The same can be expected in the power sector if the TCN is privatized.

International examples:
Countries like the USA, Canada, the UK, Germany, Turkey and China where private companies have significant investments in the power sector, hardly witness national systems collapse. Whereas, some African countries like South Africa with a much smaller population than Nigeria, generate significantly more electricity. Although South Africa in recent years has suffered from epileptic power load shedding. But its electricity is more advanced and higher electricity per capita can be attributed to a slightly more effective management. Nigeria can learn from some of the examples of the advanced countries and replicate their success by, addressing the tariffs structure and privatizing or decentralizing the TCN.

In summary therefore, the frequent power grid collapse in Nigeria can be effectively addressed by privatizing or decentralizing the TCN. The current control of the TCN by the federal government and the civil service poses significant challenges that hinder its efficiency and reliability. Privatizing or decentralizing the TCN would attract competent private sector investment, improve the transmission infrastructure, and reduce the occurrence of national grid collapses. The Tinubu administration must take decisive action to transform the TCN into a more reliable and efficient entity, ultimately benefiting the Nigerian people and the country’s development.

Iroche, was Executive Director, Finance & Accounts at the Transmission Company of Nigeria (TCN) 2013-2017 and a 2022/2023 Senior Academic Fellow. African Studies Centre of the University of Oxford. UK

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