Power in Nigeria

Increasing generating capacity in the Nigerian power sector by reducing incentives for capture

Summary:

The privatisation process in the Nigerian power sector has led to rent seeking and capture across generation, transmission and distribution activities with the collusion of both the private sector and public sector.

Our initial study of the Nigerian political settlement suggests well entrenched and powerful interests aligned to the ruling coalition are blocking productive efforts across the electricity supply chain. Here political corruption causes hugely distortionary effects in the power sector. However the principle bottleneck appears to be electricity generation where independent power producers have proved extremely inadequate at improving supply allowing distribution companies to take unfair advantage of the supply shortage and under report retail collections. Policy solutions must first address the problems of generation to ease this bottleneck.

The corruption issue:

The privatisation process has been described as flawed in Nigeria largely because politically powerful players have been huge investors but they have not necessarily been the most efficient producers. The banks funding privatisation have had their balance sheets under pressure as the sector is making heavy losses. At the other end of the supply chain distribution companies have been reporting negligible collections affecting generation capabilities, unleashing a vicious cycle in the sector.

Theory of change:

IF: a) Contract arrangements are made between the Regulatory Commission and Nigerian manufacturing units especially in manufacturing clusters (Nnewi, Otigba, Onitsha, Kano) for setting up captive power production plants (CPP) between 20 and 40 MW b) provide initial support towards their financial viability; and c) allow these CPPs to supply to the national grid (where required through sources of renewable energy, for instance solar power in the North

THEN: Constraints and corruption around production and distribution that delay investment in large scale power generation can be reduced and the issue of power outages for industry can be addressed

BECAUSE: Nigeria is already encouraging ‘embedded power generation’ suggesting supportive political conditions, corruption at the level of large IPPs and the distribution companies are of more intractable types while properly selected manufacturers may have greater incentive alignment to invest in power generation

Research methods:

Political economy analysis, Case studies, Process tracing, Focus group discussions, Econometric analysis.

Partners:  Pallavi Roy (SOAS), Jibrin Ibrahim (CDD)

Other projects

Nigeria’s EFCC

The Nigerian Economic and Financial Crimes Commission (EFCC) has been at the forefront of activist anti-corruption agencies in Africa. It has been instrumental in charging and prosecuting senior polit...

Read more

Fertilisers in Nigeria

This project will examine centralised and technology-enhanced distribution modalities that have recently been introduced into fertiliser subsidy programmes in Nigeria and Tanzania - two of the largest...

Read more

Extractives in Nigeria

Analysis suggests systemic reform will be difficult to achieve in extractives in Nigeria given the distribution of power. Our approach will be to collect data and map the interdependent network of pol...

Read more

Bribery Game in Nigeria

In Lagos, we will conduct a household level survey experiment using an embedded bribery game. Participants of the survey will be randomly assigned to a control group, or to one of several condition gr...

Read more

Health Providers in Nigeria

This cross-country project will trace the evolution of such local firms and analyse their impact on growth in their respective sectors. It will attempt to isolate proactive policy from their experienc...

Read more

Business Groups in Nigeria

This cross-country project will trace the evolution of such local firms and analyse their impact on growth in their respective sectors. It will attempt to isolate proactive policy from their experienc...

Read more

Skills in Nigeria

The shortage of technical skills in Tanzania has been one of the most fundamental constraints to its industrial development. Vocational training institutions are funded by a skills levy collected by t...

Read more