1.1 BACKGROUND TO THE STUDY
Electricity is pivotal to the economic development
of nations. Its use is directly correlated with healthy economic growth (Kaseke
& Hosking, 2013). Nigeria is one of the most populated countries in Africa
but only about 40% of the people are connected to the energy grid. The people
who actually have power experience difficulties around 60% of the time (Aliyu,
Ramli & Saleh, 2013).
Aliyu, Ramli and Saleh, (2013) claim that these
blackouts that is occasioned by poor power generation has crippled the
industrial sector. For example outages in this area of the world also have
implications for the mining industry. When power fails, workers may be trapped
in the mines, so as soon as there is a risk of failure the operations are such
down, which leads to economic difficulties (Kaseke & Hosking, 2013). Poor
power generation also causes problems for agriculture. Most irrigation lines
are run by electricity, so when the power is cut out then the crop yield
decreases, (Kaseke & Hosking, 2013). Nigeria’s energy grid is arguably in
crisis due to lack of development. The key to making a more reliable energy
sector is to find and use a renewable energy resources, rather than simply
relying on the country’s non-renewable resources for power generation. The
crisis of power generation is a complex problem stemming from a variety of
issues. This study will cover the impact of power generation on the economy of
Nigeria between 1990 and 2015 and the effect on the people who live in Nigeria
and the potential solutions to the crisis.
The people in Nigeria near the oil and natural gas
reserves often vandalize or steal oil because they feel like they should have a
share in the oil that is coming from their area of the country (US Energy
Administration, 2013). In Nigeria the shortfall of electricity leads to the overuse
of generators for energy. It is estimated that about 30% of power generated is
produced in this manner (US Energy Administration, 2013). Currently the only
plan the government has in place to help solve the power generation crisis is
to expand the fossil fuel burning sector (US Energy Administration, 2013).
Nigeria has a reputation of having one of the most corrupt governments in the
world (Ejiogu, 2012). It is rich in natural resources, which should and does
create billions of dollars of revenue, the production of the oil is not shared
with the rest of the country. About 70% of people in Nigeria live below the
poverty line and the unemployment rate is 21% (Ejiogu, 2012). Alternative forms
of power generation are not used probably because of availability of oil in
Nigeria, as it has the world’s seventh largest oil reserves (Ejiogu, 2012).
Currently Nigeria uses four different types of
energy sources for power generation and they includes natural gas, oil, hydro
and coal (Aliyu, Ramli & Saleh, 2013). The power generation sector is
heavily dependent on petroleum as a method for electricity production which has
slowed down the development of alternative forms of energy (Aliyu, Ramli &
Saleh, 2013). Three out of the four above resources used for energy production
in Nigeria are linked with increasing greenhouse gas emissions: coal, oil and
natural gas, with coal emitting the worst of the three (Middleton 2013). The
effectiveness of the six power generation companies (GENCOs) in Nigeria has
been questioned by stakeholders in recent times. The concerned authorities has
continued to blame the failure of these generation companies on the activities
of pipeline vandals and other agitating groups sabotaging the efforts of
government. However, all these has greatly affected the economic growth of the
As at 1990, the generation and
distribution of electricity in Nigeria is handled by the National Electricity
Power Authority (NEPA). By 1999-2005 (The advent of democratic government), an act was enacted
establishing PHCN, an Initial Holding Company (IHC), as a result of Government
effort to revitalize power sector. This was an intended name for privatization
which was meant to transfer assets and liabilities of NEPA to PHCN. It was
officially commissioned on the 5th of May 2005 and was to carry out
business of NEPA which is still on. In the same vein, the National Integrated Power Projects (NIPP) was inaugurated in 2004 to be able to catalyze
and fast track the upgrading of adding more capacity to the current available
power generating capacity in the country.
The PHCN, as a Company, was unbundled into 18 companies as follows:
six (6) generating companies, one (1) transmission company (i.e.
Transmission Company of Nigeria-TCN), and eleven (11) distribution companies.
The generating companies are Egbin Electricity Generating Company (EEGC),
Sapele, Ughelli, Afam, Shiroro and Kainji. There are also some new Independent Power
Producers under the auspices of the Niger-Delta Power Holding Company (NDPHC).
The 11 distribution companies are Abuja Electricity Distribution Company
(AEDC), Benin Electricity Distribution Company (BEDC), Eko Electricity Distribution
Company (EkEDC), Enugu Electricity Distribution Company (EnEDC), Ibadan
Electricity Distribution Company (IbEDC), Ikeja Electricity Distribution
Company (IkEDC), Jos Electricity Distribution Company (JEDC), Kaduna
Electricity Distribution Company (KdEDC), Kano Electricity Distribution Company
(KnEDC), Port-Harcourt Electricity Distribution Company
(PHEDC), Yola Electricity Distribution Company (YEDC). Currently, the Federal
Government owns 100% of the transmission company, while its hold on
the generating companies is 20 per cent (with 80 per cent of equity sold to private
investors. In other words; the transmission company of Nigeria (TCN)
is 100 per cent owned, generating companies (GENCOs) 20 per cent owned by government and 80 per cent private sector ownership.
On the 30th of September 2013, the Federal Government handed over
certificates of ownership to prospective owners. Since then the generation and
distribution of electricity have been transferred to the private investors. On Wednesday February 12, 2014, the Nigerian Electricity Regulatory Commission
at the meeting held with power generating and distributing companies in the
country unanimously agreed that the Transition Electricity Market (TEM) idea
should be left in the cooler for the meantime. The meaning of this is that the electricity
industry in the country is believed to currently operate in the transition
1.2 STATEMENT OF THE PROBLEM
Power generation is the hub of both economic and
technological development of any nation. The electricity industry in the Nigeria
has gone through quite a lot of metamorphosis between 1990 and 2015. Power
generation and electricity supply is a very sensitive issue with several
political and economic sophistications in many countries which most of the time
define the industry’s effectiveness. Thus, it has continuously drawn great
attention from both the industrialists and the political class. As a matter of
fact, it has become a veritable avenue to gaining more votes during elections. More
important is the fact that every other sector of the economy depends on
adequate supply of electricity through effective power generation.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of this study:
examine the impact of power generation on the economy of Nigeria between 1990
examine the level of effectiveness of the Power generating companies in
identify the factors limiting the adequate generation of Power in Nigeria
between 1990 and 2015.
1.4 RESEARCH QUESTIONS
is the impact of power generation on the economy of Nigeria between 1990 and
is the level of effectiveness of the Power generating companies in Nigeria?
are the factors limiting the adequate generation of Power in Nigeria between
1990 and 2015?
HO: There is no significant
relationship between power generation and economy development in Nigeria
between 1990 and 2015.
HA: There is significant relationship
between power generation and economy development in Nigeria between 1990 and
1.6 SIGNIFICANCE OF THE STUDY
The following are the significance of this study:
outcome of this study will educate the general public on the impact of power
generation on the economy of Nigeria between 1990 and 2015.
research will be a contribution to the body of literature in the area of the
effect of personality trait on student’s academic performance, thereby
constituting the empirical literature for future research in the subject area
1.7 SCOPE/LIMITATIONS OF THE STUDY
This study will cover the activities of power
generation companies in Nigeria between 1990 and 2015 and examining its effect
on economic development.
LIMITATION OF STUDY
Financial constraint- Insufficient fund tends to impede the
efficiency of the researcher in sourcing for the relevant materials, literature
or information and in the process of data collection (internet, questionnaire
constraint- The researcher will simultaneously engage in this study with
other academic work. This consequently will cut down on the time devoted for
the research work.