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  • PM World Journal Strategic Innovation Leadership Framework for Sustainable

    Vol. VII, Issue III – March 2018 Management of Electricity Distribution Company in Nigeria

    www.pmworldjournal.net Featured Paper by Habeeb Quadri

    © 2018 Habeeb Quadri www.pmworldlibrary.net Page 1 of 13

    Strategic Innovation Leadership Framework for Sustainable

    Management of Electricity Distribution Company in Nigeria

    - Post Privatization

    By Habeeb A. Quadri

    Introduction The imperious relationship between economic growth and electricity management has been globally established and acclaimed. Wittily, in spite of being blessed with the largest potentials for electricity in Africa, Nigeria enduringly remains a developing nation because electricity capabilities are underexplored. Within the last century, electricity management in Nigeria has evolved from fully state owned monopoly to private owned enterprise where formerly state monopolized electricity generation, transmission and distribution got segregated and unbundled. Electricity distribution unbundled into 11 private owned distribution companies with 60% stake while the Federal Government of Nigeria has a 40% interest. Electricity generation unbundled into 6 while electricity transmission outsourced to Manitoba Hydro, a Canadian company. The transformation aimed at strategic repositioning of the power sector to meet the ever-growing electricity demand in response to the growing economic activities required for GDP growth. However, a leadership appraisal of the electricity distribution company’s post-privatization revealed that significant improvements have not been recorded in operations, customer satisfaction and the privatization mandate. Meanwhile with zero investment by the FG of Nigeria throughout the 1990s, the new democratic party in 1999 spent well over $10b unproductively on the power sector between 1999- 2015. This pre-privatization lack of impactful investment by the Federal Government of Nigeria for almost a quarter of a century, gives the picture of the monster inheritance the new private investors are up against. This is why Africa has about 13% of the world population but over 600m Africans (about 47% of the world population without electricity) have no access to electricity with implications on economic activities and the GDP. Nigerian National Bureau of Statistics (NNBS) confirmed 200m Nigerian population require about 200,000MW of electricity to optimize. But less than 45% (about 80m) Nigerians have real access to the grid electricity although below the global standard per capita. The World Bank declared that countries with less than 80% level of electricity access struggle with sustainable economic growth. To augment, over 70% of Nigerians run generating plants costing about $13b every year and about 86% of corporations, industries and small & medium enterprises in Nigeria run operations with self-generated electricity, these not only destroy the ecology but also constitute over 40% of the production cost with multiplier effects on the consumers and the GDP. You further get the picture right? These pictures confirm the

    http://www.pmworldjournal.net/ http://www.pmworldlibrary.net/

  • PM World Journal Strategic Innovation Leadership Framework for Sustainable

    Vol. VII, Issue III – March 2018 Management of Electricity Distribution Company in Nigeria

    www.pmworldjournal.net Featured Paper by Habeeb Quadri

    © 2018 Habeeb Quadri www.pmworldlibrary.net Page 2 of 13

    World Bank assertion that any country with less than 80% level of electricity access struggle with economic growth. This is why Nigeria/Africa struggles with economic growth. There is a clear correlation between electricity and economic growth. These backdrops led to The World Bank forecast of electricity demand increase in Nigeria. Hence, the Nigerian power sector development remains one of the major strategic priorities of the US government under the Power Africa program. The World Bank (2018) approved the injection of $486m fresh credit facility and the proposed additional $2.6b 5-year intervention fund to reduce deficit, restore viability, improve transparency via sustainable cost reflective electricity pricing, ensure better service delivery to satisfy customers, reduce losses and reposition the Nigerian Electricity Supply Industry (NESI) for growth. These developments confirm the conclusion of the MD/CEO of Abuja Electricity Distribution Company, Engr. E. Mupwaya (2017) that: “A major problem that we are facing in the sector is characterized by liquidity challenge”. These industry pictures reinforced the fact that Nigeria electricity industry remains a deficit market and a posterity venture. Therefore, electricity distribution companies in Nigeria need to employ unconventional leadership tools to remain sustainably competitive. Boal & Hooijberg (2001) noted that the global economy is experiencing a turbulent and dynamic phase that has created a society craving for speed, action, innovation and excellence. Corporate leaders face a tremendous pressure to deliver immediate results with fewer resources, which unfortunately, resonates unrealistically well with the electricity distribution companies. Haggin et al, (2003) argues that corporate leaders must take a more innovative look into the future with strategic innovation leadership to overcome the turbulent business environment. Olajide (2016) concluded that the problem of the electricity distribution company in Nigeria stems from a lack of innovation leadership capable of correcting and improving the (wasteful) legacy of the traditional leadership systems of the Nigerian Electricity Power Authority/Power Holding Company of Nigeria (NEPA/PHCN). Pre- privatization of electricity distribution in Nigeria had leadership issues, unsatisfied bitter customers, poor network, uncoordinated teamwork, institutionalized corruption, low generation and inefficient portfolio management. Awkwardly, the post-privatization electricity distribution companies equally face same challenges including new challenges such as over-regulation by the Nigerian Electricity Regulatory Commission (NERC), spot-trading mentality, obvious human capital skill- gap, inadequate metering, lack of funding and market indebtedness. These have imposed difficulties on how effective the new disco leadership manage the paradox of “change and stability” amidst growing customer base, profitability quest, intensified business risks, diversity and technological advancement. These spaghetti of inefficiencies call for strategic innovation leadership approach bedrocked on disco leadership positive self-regulating capabilities to create a workplace environment that supports vigilance, tolerance, positive organizational scholarship and integrated systems and processes that create ongoing improvements for operational excellence and sustainable performance. This paper proposes a strategic innovation

    http://www.pmworldjournal.net/ http://www.pmworldlibrary.net/

  • PM World Journal Strategic Innovation Leadership Framework for Sustainable

    Vol. VII, Issue III – March 2018 Management of Electricity Distribution Company in Nigeria

    www.pmworldjournal.net Featured Paper by Habeeb Quadri

    © 2018 Habeeb Quadri www.pmworldlibrary.net Page 3 of 13

    leadership framework for sustainable management of electricity distribution company in Nigeria, post-privatization.

    Pre-Privatization Electricity Distribution in Nigeria – Historical Perspective Prior to 1972, the Nigerian power sector witnessed several transformations. In 1972, the Niger-Delta Authority (NDA) was merged with the Electricity Corporation of Nigeria (ECN) to form the Nigeria Electric Power Authority (NEPA). NEPA enjoyed monopoly of generation, transmission and distribution of electricity in Nigeria and some neighboring countries with the power to fix tariff which metamorphosed into a free-for-all pricing as NEPA officials usually had their own unofficial but prevailed pricing driven by mood or connection! Nigerian customers were usually at the mercy of the NEPA officials and not the operating system for all the wrong reasons. Some customers got used to it till today. Whereas, NEPA/PHCN never met the electricity demand in Nigeria and, was plagued with years of under investment by the Nigerian government, dilapidated infrastructure, poor network, poor power generation, poor customer satisfaction, monumental corruption and traditional leadership style. These resulted in a total loss of customer confidence in NEPA/PHCN, a battered goodwill the discos inherited, regrettably.

    In 1999 the new democratic government revealed among others, that:

     Out of 79 generation units existing in the country, only 19 were operational

     Average daily generation was at 1,750MW

     No new infrastructure was built in the sector between 1991-1999

     About 100m Nigerians (140m population then) with no access to electricity. These unacceptable inefficiencies with untold hardship on Nigeria (GDP) and the welfare of Nigerians (GNH) prompted the establishment of the Electric Power Reform Implementation Committee (EPIC) by National Council on Privatization that resulted in the National Electric Power Policy (NEPP) in September 2001. NEPP recommended:

     The establishment of an institution charged with regulating the power sector  NEPA should be unbu