States free to generate their own power, what could it mean?

State governments are free to generate and distribute their own power, subject rules by the Nigerian Electricity Regulatory Commission. Heavy consumers of power also have the liberty to purchase energy from sources other than Distribution Companies (DISCOs) but will have to pay a rate between N30-N80 per kilowatt. This was stated in a communique issued after the 18th power sector operators meeting.

Going forward, state governments can now move into electricity generation and distribution in order to enhance commercial activities in their domain. This idea has been pushed by Lagos, Kaduna, Anambra and Ogun in the past, and one of the reasons is that due to the cost of power, manufacturers tend to concentrate around areas that have regular power. A state that can guarantee decent power supply will see a boost in manufacturing, and as a ripple effect, other commercial activities.

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Such states will also benefit from enhanced tax revenue both from companies operating in their domain, and the individuals that such companies will employ.

Finally, the states may find it easier to raise money to run power operations, which are expensive. running these operations as they would be able to raise the necessary financing. The DISCOs are currently hampered by several issues ranging from heavy loans due to commercial banks that funded their acquisition, poor payment by customers, and an inability to meter them. States will also have no issues with right of way when expanding or building infrastructure to do distribute or generate power.

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On the flip side, some of the issues that led to power privitisation in the first place are yet to be sorted. Issues around corruption, and the simple fact that this change is just from a communique, and is not enshrined in the law, means that another government can reverse it very easily.

Finally, despite an already installed 12,000MW power capacity, Nigeria only averages about 6,000MW because of sabotage resulting from broken gas pipelines, poor planning of gas supply and evacuation. The states do not have the security outfits or legal backing that will be needed to sort these issues out.