Why privatisation failed – the four steps that can save Nigeria’s power sector

Last week, I examined the anatomy of Nigeria’s sixty-year electricity tragedy: over $40 billion spent, thousands of megawatts stranded, and a sector weakened by corruption, policy inconsistency, and selective accountability. I pointed to the irony that while former Minister Saleh Mamman was swiftly jailed and former Minister Olu Agunloye remains in prolonged litigation, Professor Barth […]

Last week, I examined the anatomy of Nigeria’s sixty-year electricity tragedy: over $40 billion spent, thousands of megawatts stranded, and a sector weakened by corruption, policy inconsistency, and selective accountability. I pointed to the irony that while former Minister Saleh Mamman was swiftly jailed and former Minister Olu Agunloye remains in prolonged litigation, Professor Barth Nnaji resigned under the cloud of conflict-of-interest allegations yet was never prosecuted, even as the Geometric Power project, he pioneered in Aba, has emerged as one of Nigeria’s few genuine electricity success stories. Under Governor Alex Otti’s administration, the Aba integrated power network has become central to Abia’s energy turnaround, proving that stable electricity in Nigeria is possible when technical competence, investment, and political will align.

I also highlighted the emergence of a new reality: states, regional markets, and private industrial giants are beginning to bypass Abuja entirely. The unavoidable question now is this: why exactly did privatisation fail, and can Nigeria still rescue its power sector before it collapses into permanent fragmentation?

The answer is uncomfortable because the problem was never privatisation itself. Breaking up NEPA into generation companies, transmission, and distribution entities was not inherently wrong. The real disaster was the reckless and politically compromised manner in which the process was executed. Nigeria privatised darkness without first building the institutions required to support a market system. We transferred public monopolies into private hands without enforcing mandatory metering, guaranteeing cost recovery, fixing transmission infrastructure, or ensuring that investors possessed the financial and technical capacity to manage the assets they acquired.

The result is the worst hybrid imaginable: a broken public monopoly replaced by a broken private market. Distribution companies inherited millions of unmetered consumers, creating a culture of estimated billing, collection losses, and public distrust. Many consumers refuse to pay because they do not believe the bills reflect reality. Several DisCos recover barely half of what they invoice. Generation companies cannot recover costs because the market remains chronically illiquid. Some GenCos spend months generating little or no electricity because the transmission system cannot evacuate available power. Meanwhile, the Transmission Company of Nigeria remains under state ownership but without the operational independence or investment required to wheel adequate electricity nationwide.

This is the central paradox of Nigeria’s power crisis. Installed capacity exists on paper, but usable electricity does not reach homes and industries. The national grid frequently struggles to transmit more than 4,500 megawatts reliably for over 200 million people. Egypt added more than 30,000 megawatts within five years through transparent procurement and infrastructure expansion. Vietnam transformed itself from a blackout-prone economy into a manufacturing hub by combining state discipline with private investment. Ghana ring-fenced its transmission operator and imposed measurable performance targets that significantly improved reliability. The lesson is clear: electricity reform succeeds only where governance, accountability, and technical planning exist together.

Nigeria instead allowed politics to dominate economics. Tariffs became tools of populism rather than instruments of sustainability. Governments repeatedly refused to permit cost-reflective pricing while failing to subsidise the sector transparently. The consequence is a liquidity crisis estimated at over N6 trillion in unpaid obligations to generation companies and gas suppliers. Banks are exposed, investors discouraged, and infrastructure continues to decay. Yet ordinary Nigerians still pay some of the highest effective electricity costs in the world because millions rely on petrol and diesel generators to survive.

This generator economy is quietly destroying Nigeria’s foreign exchange position. Billions of dollars are spent annually importing fuel largely because homes, factories, offices, hospitals, and small businesses depend on self-generation. Reliable electricity would drastically reduce generator dependence, conserve foreign reserves, ease pressure on the naira, lower inflation, and improve industrial productivity. Every hour of stable grid power is therefore not merely an electricity issue; it is an economic and national security imperative.

But while the federal system hesitates, others are moving ahead. Imo State’s Orashi Electricity Company is already distributing power under the new constitutional framework allowing states to participate directly in electricity markets. Regional initiatives involving Kano, Kaduna, and Katsina are pursuing integrated electricity arrangements that may eventually operate semi-independently of the national grid. Off-grid solar has become a multi-billion-dollar industry because Nigerians no longer trust the central system to deliver. Most significantly, Aliko Dangote’s reported ambition to scale toward 20,000 megawatts raises the possibility of embedded industrial generation networks supplying refineries, factories, and industrial clusters directly, largely outside the federal grid.

That possibility should alarm policymakers. If major industries and economically viable urban centres migrate into private power networks, the national grid risks becoming a residual welfare system serving only those too poor to escape it. Nigeria could evolve into two separate electricity nations: one efficient, privately powered, and industrialised; the other trapped in perpetual darkness under a collapsing public grid. That is not reform. It is economic segregation.

The country still has a narrow window to prevent that outcome, but only if it embraces reforms that are structural rather than cosmetic. First, transmission must become genuinely independent. Nigeria urgently requires a legally autonomous System Operator separated from TCN, with ring-fenced financing, professional management, and strict performance obligations insulated from political interference. Without fixing transmission, additional generation is meaningless.

Second, distribution reform must become ruthless. Any DisCo losing more than 35 per cent of supplied electricity for three consecutive years should automatically face licence revocation or restructuring. Mandatory nationwide metering should be completed within 24 months using concessional international financing. Estimated billing should no longer be treated as regulatory inefficiency but as economic sabotage.

Third, tariff policy must return to economic reality. Cost-reflective tariffs are unavoidable if the sector is to survive, but they must be accompanied by transparent protections for vulnerable citizens. Subsidies should directly target the poorest households rather than disappearing through opaque market interventions. The massive legacy debt choking the market should be resolved through a one-time audited bond programme tied to enforceable reforms and performance conditions.

Finally, Nigeria must confront corruption honestly and consistently. The contrasting outcomes involving Mamman, Agunloye, and Nnaji have created a perception that accountability depends less on evidence than on political convenience. That perception alone undermines investor confidence and public trust. The country, therefore, needs a Special Power Sector Court with exclusive jurisdiction over electricity-related corruption, procurement fraud, market manipulation, and conflicts of interest. Cases must be concluded within strict timelines. Whistleblowers should receive meaningful protection and incentives, while officials convicted of looting the sector should face lifetime bans from public office and aggressive international asset recovery measures.

The cautionary lesson of the Barth Nnaji episode is particularly important because not every abuse appears as outright theft. Some abuses emerge through conflicts of interest hidden behind technical expertise, intellectual prestige, or policy influence. Corruption can wear a suit, hold a doctorate, or present itself as reform. That is why Nigeria needs not only criminal enforcement but also rigorous ethical standards and transparent conflict-of-interest rules.

The new Minister of Power, Joseph Tegbe, has promised grid stabilisation and performance monitoring. Those are welcome signals. But success will depend on whether his administration recognises the irreversible reality unfolding across Nigeria: the electricity revolution is already happening outside federal control. It is happening in regional markets, industrial clusters, solar rooftops, and state-driven initiatives from Owerri to Kano. Abuja can either lead this transformation intelligently or resist it until irrelevance overtakes it.

For decades Nigerians were told to wait patiently for light at the end of the tunnel. But perhaps the real lesson is this: the light was never going to come from the tunnel itself. Nigerians are now building that light on their own. The question is whether the federal government will finally clear the path or remain remembered as the obstacle citizens had to bypass in order to power their future. The Geometric success story in Aba has already shown what is possible when policy, private capital, and political will converge around a common vision. The tragedy would be if Nigeria learns from it too late.