Friday, November 29, 2013

Privatization and Power

Nigeria’s recent privatization exercise of the power sector has been carried out on a comprehensive scale, with the privatization of both the generation (GENCOS) and distribution companies (DISCOS) simultaneously. Public reaction to the wholesale privatization exercise is mixed; some support it, some are against it and others have a wait and see attitude. The Nigerian government sees it as a necessary move to speed up access and availability of power as part of the Vision 20:2020.

Privatization, the transfer of ownership and control from the public to the private sector, is not a new exercise in developing or developed economies. The broad fundamental goal of this exercise is usually to improve the condition of the power sector which may not happen in the absence of the exercise.

It is also expected that with increased availability of power, the business environment would improve and so would everyday life for ordinary Nigerians. In theory, the privatization exercise will result in consumers spending less on alternative energy (generators, diesel fuel, etc). However, by opening the power sector to private firms, market forces kick in and prices will no longer be stabilized by the Government, but rather led by the market. Consumers will feel the pinch of increased costs, weighed against by the drastic improvement of the availability of power.

There are concerns however, about how the government would actually use the revenue generated from the sale of these public enterprises. Another question from opponents of privatization has to do with how the power will be distributed among the people and the impact it will have on the most marginalized groups in Nigerian society. It’s been reported already that some groups in society (businesses and individuals alike) are feeling the pinch of increased costs.

While this exercise is a great stride to improve the power landscape in Nigeria, it remains a challenge to the Nigerian government and people. Although there is no magic solution, there must be commitment to ensure that the privatization proceeds as planned, and in the end, that there is a benefit to Nigerians and an improvement to the power sector as a whole. 

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