Nigerian Electrical Power Sector Reforms and
Privatization: An Overview
Yahaya Afolabi Abass
Department of Electrical Engineering
Instituto Superior de Engenharia de Coimbra, Coimbra, Portugal
aayahaya5@gmail.com
AbstractAlthough Nigeria has enormous natural reserves of
crude oil, natural gas and lots of solar irradiation, yet Nigeria is
marked with huge electric power deficiency. In a bid to upgrade
the electrical power infrastructure and attract private investors,
the Nigerian government enacted the Electric Power Sector
Reform Act which provides basis for the privatization of electric
power supply chain. This paper discusses the evolution and
travails of the Nigerian power supply sector from its very
beginning. It also discusses the present stage of events and the
challenges encountered.
Index Termselectric power, Electric Power Sector Reform Act,
energy, Nigeria, privatization.
I. INTRODUCTION
E LECTRICAL energy is the bedrock of modern civilization
as any nation without sufficient electrical power cannot
fully harness its potentials. Installed electricity generation
capacity has been a basis of comparison between under-
developed and developed countries to which Nigeria belongs to
the former [1]. Nigeria, with a population of 182.2 million [2],
generates less electricity than North Dakota with a population
of 760,000 [1]. However, the Nigerian power sector has not
always been bleak. Several reforms, agencies and policies have
been decreed over past years to synergize government and
private sector efforts in the power industry.
The notion of electric power system in Nigeria started in
1898 as the first power station of 60KW was built while several
municipal local stations were later built [3] [4]. Nigerias first
utility company, Nigerian Electricity Supply Company
(NESCO) formed in 1929 [3], and all other municipal power
departments were joined to form the Electricity Corporations of
Nigeria (ECN) in 1951 [4]. To further harness the vast hydro-
energy potentials in Nigeria, the Niger Dams Authority (NDA)
was established in 1962 [4]. NDA increased power generation
via completed hydro-power projects and collaborated with
ECN to form the national grid in 1966 [4]. This integration
increased the efficiency of the entire network. However, by
1973 NDA and ECN merged to form the National Electric
Power Authority (NEPA) [4]. NEPA operated as a vertically
integrated utility having monopoly of generation, transmission
and distribution of electricity. But NEPA could not satisfy the
power needs of Nigerians due to mismanagement and the
government decided to privatize NEPA [5]. Hence, the
government enacted the Electric Power Sector Reform Act
(EPSRA) of 2005 which provided basis for the power sector
privatization. EPSRA made possible the Power Holding
Company of Nigeria (PHCN) which serves as an initial asset
and liability holding company for NEPA, and Nigerian
Electricity Regulatory Commission (NERC) which serve as an
independent regulatory agency in liberalized electricity market
[6] [7]. The Act also provides for the unbundling of the power
supply chain into six generation companies (GENCOs), eleven
distribution companies (DISCOs) and only one Transmission
Company of Nigeria (TCN) [8]. At the transitional stage of
privatization, NERC issued licenses to successor companies
regarded as most preferable bidders for the GENCOs and
DISCOs, while TCN remains 100% run by the government [5].
To further facilitate privatization and attract private investors,
the Federal Government of Nigeria (FGN) launched the
National Integrated Power Project (NIPP) and several licenses
are issued to individuals and companies in the Independent
Power Producers (IPP) initiative [8]. These made the Nigerian
power sector more competitive and yielded some positive
results however little. Furthermore, General Electric (GE)
projects revenue of over $1 billion from Nigeria, and Siemens
AG projecting more than 5000MW turbines addition shows that
investors are now optimistic [1]. Apparently, there are huge
potentials in the Nigerian power sector for investors as there is
a lot to be desired on every aspect of the power supply chain.
This paper describes the Nigerian power sector from
inception to the reforms recently taking place. The paper is
written in sections. Section II discusses the reforms, major
players and states of the Nigerian generation sector. Section III
discusses the transmission sector, grid code and electricity
market operation and control. Section IV gives the list of
distribution companies and types of consumers in the
distribution sector.
II. GENERATION SECTOR
Prior to the privatization of the power sector, installed
generation capacity was 5898 MW, which has now increased
to 12522MW after privatization [9]. The defunct NEPA was
unbundled into 6 GENCOs under PHCN, which were all sold
to private investors called the Successor Companies (SC) [4].
NERC issued licenses to the SC while Nigerian Electricity C. National Integrated Power Project (NIPP)
Liability Management Company (NELMCO) assumed all Unlike the successive GENCOs, NIPP started in 2004 to
stranded liabilities of PHCN not absorbed by the SC [3]. Aside build new power plants based on the FGN initiatives to
the GENCO SCs, the IPP and the NIPP programs have also facilitate privatization. FGN builds power plants and sell them
been active and there are now 25 grid-connected generation to private investors including incentives [3]. There are 10 NIPP
plants in the National Electric Supply Industry (NESI) [9]. plants with a total capacity of 5454MW and managed by Niger
Furthermore, Nigeria has several energy resource options for Delta Power Holding Company (NDPHC) [3] [13]. Eight of the
the production of electricity. plants utilize open cycle gas turbines while the remaining two
A. Energy Resources use combined cycle gas turbines [13]. Table III gives a list of
the 10 NIPP plants. All the NIPP plants have been sold and
By demography and natural resources, Nigeria has huge integrated to the grid.
potentials to generate electricity via fossil fuels and renewable
sources. However, 75% of power plants in Nigeria are gas-fired TABLE III
while 25% are hydro-based [9]. Nigeria is considered the 9th NIPP PLANTS AND CAPACITY [13]
largest gas reserve nation with 5 trillion m3 and production of S/N NIPP Capacity (MW)
about 42 billion m3, of which 40% is lost to gas flaring [3] [9].
Also Nigeria is an oil exporting nation with a reserve of 37.2 1. Alaoji Power Plant 1131
billion barrels [10]. Significant solar irradiance and wind speed 2. Ihovbor Power Plant 508
in northern Nigeria are gearing investors in the renewable 3. Calabar Power Plant 634
energy sphere [11]. Table I shows a list of energy resources in 4. Egbema Power Plant 381
Nigeria. All old coal-fired plants have all been moribund but
new ones of 1000 MW are to be built by investors [12]. 5. Gbarain Power Plant 254
6. Geregu II Power Plant 506
TABLE I
NIGERIA ENERGY RESOURCES [7] 7. Sapele II Power Plant 508
8. Olorunsogo II Power Plant 754
9. Omoku II Power Plant 265
10. Omotosho II Power Plant 513

D. Independent Power Producer (IPP)

IPPs are generation plants owned by private individuals,
companies and government buildings for their private use.
These plants are known as captive power plants and permitted
by NERC liable for renewal every 5 years [14]. A capacity of
at least 1MW is a prerequisite for IPP license and any surplus
can be sold with the appropriate generation license [14]. NERC
has issued more than 70 IPP permits most of which are owned
by manufacturing companies [8]. Most IPPS are off-grid but
some are on-grid connected. Examples are the Shell 642MW
B. Generation Companies (GENCOs) and Nestls 3MW off grid plants.
The EPSRA enabled unbundling of PHCN generation
capacity into six government-owned GENCOs which were sold E. Renewable Sources Based GENCOs
to six private companies known as the successor generation Although more than 75% of electricity in Nigeria is
companies. Table II enlists names, types, and capacities of each generated via gas-fired plants, there has been lots of studies and
GENCO [3] [8]. The thermal plants have 4269.2MW and hydro interest in the renewable potentials. Several private and
plants have 1930MW installed capacities but the available and international organizations now sponsor several renewable
operational capacities of plants are much lower [9]. Nigerian power plants especially solar farms [11]. The northern part of
government still owns 20% stake in all GENCOs [9]. Nigeria is the recipients of all these projects. Just recently the
TABLE II
Nigeria Bulk Electricity Trader (NBET) signed Power Purchase
SUCCESSIVE GENCOS AND PLANT CAPACITIES [3] Agreements with 14 solar power plants with agreements on
solar feed-in tariff of $0.07/KWh [15]. A total deal on 1125MW
S/N Generation Company Plant Type Capacity (MW) solar plant power output was made. The solar plants are
1. Afam Power Plc (1-V) Thermal 987.2 projected to start production by 2017. Table IV gives a list of
2. Egbin Power Plc Thermal 1320 some of the solar power companies and their capacities.
3. Kainji/Jebba Hydro Electric Plc Hydro 1330 III. TRANSMISSION SECTOR
4. Sapele Power Plc Thermal 1020 The Transmission Company of Nigeria (TCN) is one of the
5. Shiroro Hydro Electric Plc Hydro 600 effects of EPSRA and it is the only transmission company in
6. Ughelli Power Plc Thermal 942
Nigeria. The TCN is still 100% owned by the FGN. In a bid to

2
better restructure TCN, make it more effective and attract TABLE IV
investors, Manitoba Hydro International (MHI) was contracted SOME SOLAR POWER GENCOS [15]
with the management of TCN for 4 years, and the contract
S/N Solar Company Capacity (MW) Location
expired in 2016 [16]. The transmission system consists of
330KV and 132KV double circuit systems, 32 330/132KV, 105 1. Pan Africa Solar 75 Katsina
132/33KV substations, and 5650km and 6687km of 330KV and 2. Nigerian Solar Capital Partners 100 Bauchi
132KV lines respectively [10]. The total capacity of power 3. Afrinergia Power 50 Nasarawa
transformers at the substations is about 21000MVA [17].
4. Motir Dusable 100 Nasarawa
However, the transmission grid has a meagre capacity of
5300MW and has transmission loss of about 7.4% [9]. The 5. Nova Solar 100 Katsina
TCN was divided into 3 subsidiaries; Transmission Service 6. Kvk Power 100 Sokoto
Provider (TSP), System Operator (SO), and Market Operator 7. Middle Band Solar 100 Kogi
(MO). Fig. 1 shows the extent and spread of the national grid. 8. LR Aaron Power 100 Abuja
A. System Operator (SO) 9. CT Cosmos 70 Plateau

The division of TCN that is saddled with the day-to-day 10. Anjeed Innova 100 Kaduna
operations, control and planning of the physical grid. The SO is
responsible for demand forecast, generation scheduling and
dispatch, maintaining system reliability and stability, and
ensuring ancillary services are available [3] [18]. The SO also
plans the grid system, enforces the grid code, has access to the
system SCADA and EMS, gives rational allocation of power
during generation-load imbalances, and responsible for
expansion of both 330KV and 132KV transmission grids [18].
The SO, now an Independent System Operator (ISO), is
managed by the Nigerian Electricity System Operator (NESO).
NESO used to be managed by MHI. NESO has seven major
departments; control and operations, system planning, SCADA,
technical services, communications, transitional electricity
market, and system performance [18]. Aside the central
national control center (NCC), NESO has several regional
control centers (RCC), and regional operations coordination
units (ROC) to facilitate better monitoring, control and
maintenance of the grid [18]. The functional structure of NESO
is depicted in Fig. 2.

Fig. 2. Functional structure of System Operator (SO) [18]

B. Market Operator (MO)

Fig. 1. The extent of the 330/132KV grid [10]
The Nigerian electricity market operations are managed by
a subsidiary of TCN known as the Operator of the Nigeria
Electricity Market (ONEM) [19]. ONEM manages electricity
trading between all participants and ensures efficient and
competitive market exist. It registers all agreements between
participants and ensures proper payments and settlements based
on market rules. ONEM is basically charged with the micro-
economics of the electricity trading market. It calculates the
system marginal cost for each market period, calculates
transmission charges and supervises the financial settlement of
the TSP and GENCOs [3] [20]. To operate efficiently, ONEM
ensures all participants have proper metering facilities at each
point of connection, balances any contractual imbalances and
administers ancillary services registration and settlements [20].
An important fiscal agency pivotal to the Nigerian electricity
market operation is the Nigeria Bulk Electricity Trader
(NBET).

3
C. Nigeria Bulk Electricity Trader (NBET)
NBET is a government agency pivotal to operational risks
and liabilities at this early stages of privatization. NBET also
known as bulk trader deals mainly with the procurement of bulk
electricity from GENCOs and resale to DISCOs [21]. NBET
maintains Power Purchase Agreement (PPA) with GENCOs
and Vesting Contracts (VC) with DISCOs. The PPA also
contains risk allocation, tariff structure and usually has a 20-
year tenure. NBET is not meant as a sole power procurement
participant in the market as DISCOs are envisaged and urged to
obtain direct PPAs with GENCOs whenever the DISCOs
become commercially viable. Fig. 3 depicts the operations of
the electricity market [10].
Fig. 3. Operational structure of the electricity market [10]
D. Grid Code
The grid code of the Nigerian power grid network is
implemented by TCN and all participants that connect to the
grid. The grid code contains instructions that ensures system
security, frequency and voltage balance, and reliability [22].
The code demands discipline of all participants as defaulters are
punished by NERC. The grid code to ensure performance of the
transmission grid are listed below [3] [22].
The power system nominal frequency is 50Hz, but a
maximum allowed frequency deviation of 0.5% and
2.5% of nominal value are allowed under system
stress.
Maximum and minimum voltages at all voltage levels
of the grid are specified in Table V given below. But
further deviations of not more than 5% can be
expected during stress or system faults.
TABLE V
Voltage Tolerance Values [22]
Voltage Minimum Voltage Level Maximum Voltage
Level (KV/PU) Level (KV/PU)
330 KV 313.5 (0.95) 346.5 (1.05)
132KV 118.8 (0.9) 145.0 (1.098)
33KV 31 (0.94) 34.98 (1.06)
11KV 10.45 (0.95) 11.55 (1.05)
4
A total harmonic distortion (THD) of not more than
1.5% with no individual harmonic higher than 1% for
330KV grid under normal operating conditions and
during planned or fault outage. For the 132KV a THD
of 2% with no individual harmonic higher than 1.5%.
The Basic Insulation Level (BIL) of user apparatuses
shall be as given in Table VI below.
TABLE VI
Values for Basic Insulation Level (BIL) [22]
Voltage Level Basic Insulation Level (BIL)
330KV 1050KV
132KV 650KV
All plants and apparatus to be connected to the grid
must satisfy the ISO 9001 quality assurance and should
be designed to the IEC standard or equivalent.
At normal operation each generation unit must have the
ability to supply rated power output within 0.85 lagging
and 0.95 leading power factor limits.
Within allowed power system frequency range, each
unit is expected to be capable of generating at rated
power output.
An online generation unit must have the capability of
maintaining it active power output at steady state
within allowed voltage variation limits.
A generation unit operating a synchronous alternator
must be capable of supplying rated reactive power at
steady state when voltage ranges to 10% of nominal
voltage at point of connection.
A generation unit operating a synchronous alternator
must not need more than 10 hours for cold start-up, 6
hours for warm start-up, and 3 hours for hot start-up in
order to synchronize and pick-up loads.
The ramp-up and ramp-down rates of online steam/gas-
turbine operated generation unit must be at least 3% of
GCR per minute.
IV. DISTRIBUTION SECTOR
The distribution sector, like the generation and transmission
sectors have been privatized due to provisions of the EPSRA.
The distribution sector which enjoyed a nationwide monopoly
under NEPA and PHCN, has now been sold to 11 DISCOs [4].
The DISCOs are sectioned based on geographical locations and
each operates the distribution system within it limits. Most
DISCOs have not achieved commercial viability and hence
cannot buy power directly from GENCOs but via VC with
NBET [21]. The list of all DISCOs is given in Table VII while
their areas of operation is shown in Fig. 4. Obviously, Lagos
state has the highest power consumption of 26% of power
allocation.
 TABLE VII capacity, expansion of transmission networks and better
LIST OF ALL DISTRIBUTION COMPANIES [3] nationwide access of citizenry to stable power supply.
Percentage Load
S/N Distribution Company TABLE VIII
Allocation
CONSUMER TYPES ON DISTRIBUTION GRID [3]
1. Abuja Distribution Company 11.5
2. . Benin Distribution Company 9 Consumer
Description Remarks
3. Eko Distribution Company 11 Types
4. Ikeja Distribution Company 15 R1 Life-line (50KWh)
5. Enugu Distribution Company 9 R2 1 and 3 Phase A consumer who uses his

Residential
premises exclusively as a
6. Ibadan Distribution Company 13 LV Maximum
R3 residence with no commercial
7. Jos Distribution Company 5.5 Demand
intents.
HV Maximum
8. Kaduna Distribution Company 8
R4 Demand
9. Kano Distribution Company 8 (11/33KV)
Port Harcourt Distribution
10. 6.5 C1 1 and 3 Phase A consumer who uses his
Company

Commercial
premises for any purpose other
LV Maximum
11. Yola Distribution Company 11.5 C2 than exclusively as a residence or
Demand
as a factory for manufacturing
HV Maximum
goods
C3 Demand
(11/33KV)
D1 1 and 3 Phase
A consumer who uses his

Industrial
LV Maximum
D2 premises for manufacturing goods
Demand
including welding and
HV Maximum
ironmongery
D3 Demand
(11/33KV)
A1 1 and 3 Phase Customers such as agriculture
LV Maximum (agroallied enterprises involving
A2
Demand processing are excluded), water
Special

boards, religious houses,

HV Maximum Government and teaching
A3 Demand hospitals, Government research
(11/33KV) institutes and educational
establishments
Street
S1 1 and 3 Phase
lighting

Fig. 4. States covered by each DISCO [3] REFERENCES

At the distribution level, power is transmitted via 11KV and
0.415KV distribution feeders. Most distribution substations are
11/0.415KV station with transformer capacity of 500MVA or
less, while few are 33/0.415KV substations. Most distribution
network are overhead while very rare cases are underground.
Wooded and concrete poles are mostly used to support the
distribution grid. The DISCOs are responsible for providing
metering facilities to consumers for proper consumption
measurements and billing system [14]. The different types of
consumers a DISCO interact with are listed in Table VIII.
V. CONCLUSSION
This paper has presented an overview of the Nigerian
electric power sector from its genesis to the present stage of
privatization and operation. The involvement and efforts of the
Federal government of Nigeria to solve its power insufficiency
via legislative and regulatory actions are delineated. The
unbundling and take over by several private investors of the
generation and distribution sector is discussed. However, the
Nigeria power sector is yet to be a success story. There is still
a long way to go as regards improvement of generation
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