The Impact of Privatization and Commercailization on Nigeria's Power Sector (Acase Study of Power Holding Company of Nigeria)
THE IMPACT OF PRIVATIZATION AND COMMERCIALIZATION ON NIGERIA’S POWER SECTOR [A CASE STUDY ON POWER HOLDING COMPANY OF NIGERIA (PHCN)]
1.1 BACKGROUND TO THE STUDY
Privatization is the implementation of a decision to sell companies owned by the State to private individuals/ companies.
Benefits of privatization are making the public sector commercial enterprise survive in competitive markets through better efficiency, higher productivity, improved product quality and customer service, and reduction of waste and leakages due to State ownership.
Prior to the enactment of EPSRA, 2005, FGN was responsible for policy formulation, regulation, operation, and investment in the Nigeria power sector. Regulation of the sector was done through the Federal Ministry of Power (FMP) with operations through the National Electric Power Authority (NEPA), a wholly owned SOE responsible for power generation, transmission and distribution.
To address the twin issues of NEPA’s poor operational and financial performance, the FGN amended the then prevailing laws (Electricity and NEPA Acts) in 1998 to remove NEPA’s monopoly and encourage private sector participation. The amendments, however, were not far –reaching. This informed FGN of the need to undertake holistic policy, legal and regulatory reforms. The Electrical Power Policy, 2001, specifies the reform agenda, while EPSRA provides the legal bases for the unbundling of NEPA, the formation of successor companies and the privatization of the latter.
Consequently, FGN established the Power Holding Company of Nigeria(PHCN-the initial holding company) and subsequently unbundled it into eighteen (18) successor companies. Strategically, the objectives of reform include (i) the transfer of management and financing of SC operations to organized private sector (ii) the establishment of an independent
1.1 BACKGROUND TO THE STUDY
Privatization is the implementation of a decision to sell companies owned by the State to private individuals/ companies.
Benefits of privatization are making the public sector commercial enterprise survive in competitive markets through better efficiency, higher productivity, improved product quality and customer service, and reduction of waste and leakages due to State ownership.
Prior to the enactment of EPSRA, 2005, FGN was responsible for policy formulation, regulation, operation, and investment in the Nigeria power sector. Regulation of the sector was done through the Federal Ministry of Power (FMP) with operations through the National Electric Power Authority (NEPA), a wholly owned SOE responsible for power generation, transmission and distribution.
To address the twin issues of NEPA’s poor operational and financial performance, the FGN amended the then prevailing laws (Electricity and NEPA Acts) in 1998 to remove NEPA’s monopoly and encourage private sector participation. The amendments, however, were not far –reaching. This informed FGN of the need to undertake holistic policy, legal and regulatory reforms. The Electrical Power Policy, 2001, specifies the reform agenda, while EPSRA provides the legal bases for the unbundling of NEPA, the formation of successor companies and the privatization of the latter.
Consequently, FGN established the Power Holding Company of Nigeria(PHCN-the initial holding company) and subsequently unbundled it into eighteen (18) successor companies. Strategically, the objectives of reform include (i) the transfer of management and financing of SC operations to organized private sector (ii) the establishment of an independent