The Impact Of Power Generation On Economic Performance Of Nigeria (1970-2015)

Project and Seminar Material for Economics

The Impact Of Power Generation On Economic Performance Of Nigeria (1970-2015)


The study evaluates the impact of power generation on Nigeria economy. primary data were analyzed using simple percentage and chi-square technique. The Power Sector has a great importance to our lives and takes a pivotal role in the economic transformation process. The need for electricity is paramount for the growth of a country, access to electricity as the basic form of energy supply to the masses is vital for the development of a nation’s economy. The logic behind this project is to critique the impact of power generation on Nigeria economy, also to find better energy sources for the production of electricity to rural areas in Nigeria by Power Holding Company of Nigeria. Therefore, the study recommends that government should encourage a level- playing field for all energy forms available in the country by diversifying its power-generation portfolio.

Chapter One


1.1 Background to the Study

The 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 nation negatively.

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 centowned, generating companies (GENCOs) 20 per cent owned by government and 80 per centprivate 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 regime.

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:

  1. To examine the impact of power generation on the economy of Nigeria between 1990 and 2015.
  2. To examine the level of effectiveness of the Power generating companies in Nigeria.
  3. To identify the factors limiting the adequate generation of Power in Nigeria between 1990 and 2015.

1.4 Research Questions

  1. What is the impact of power generation on the economy of Nigeria between 1990 and 2015?
  2. What is the level of effectiveness of the Power generating companies in Nigeria?
  3. What are the factors limiting the adequate generation of Power in Nigeria between 1990 and 2015?

1.5 Hypothesis

  1. H0: There is no significant relationship between power generation and economy development in Nigeria between 1990 and 2015.
    H1: There is significant relationship between power generation and economy development in Nigeria between 1990 and 2015.
  2. H02: there are no factors limiting the adequate generation of Power in Nigeria between 1990 and 2015
    H2: there are factors limiting the adequate generation of Power in Nigeria between 1990 and 2015

1.6 Significance of the Study

The following are the significance of this study:

  1. The outcome of this study will educate the general public on the impact of power generation on the economy of Nigeria between 1990 and 2015.
  2. This 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 and interview).

Time 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.

Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study.

Organizational Privacy:

Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

1.8 Operational Definitions of Terms

Power Generation

Electricity generation is the process of generating electric power from sources of primary energy.


Electricity is the set of physical phenomena associated with the presence and motion of electric charge

Economic Growth

An increase in the amount of goods and services produced per head of the population over a period of time.

1.9 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain the impact of power generation on Nigeria economy 1990-2015.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of power generation in Nigeria.

5.2 Summary

The Federal Government of Nigeria has made several efforts to assist in the growth of power sector and industrial development, however the corruption on the act of government officials who are supposed to handle this project have limited the success of the project. 62 Against the background of this problem the study highlights some policy measures adopted by government to develop Nigeria’s energy resources, assess the outcome, indicate factors contributing to energy in the country and recommend some policy measures aimed at minimizing the crisis

5.3 Conclusion

This study attempts to examine the relationship that exists between electricity generation and economic growth in Nigeria Unarguably, the most singular impediment to the attainment of Nigeria’s vision to become one of the 20 developed economies in 2020 is power because of the direct bearing it has on other economic indicators like unemployment rate and low capacity utilization in the manufacturing sector. Although, the overall picture reveals availability of enormous energy resources in the country which far exceed energy requirement of the country. However most of these resources are underutilized particularly natural gas. This suggests that Nigeria’s energy problem is not a lack of it, but its development and utilization. Therefore, policy reforms should focus on encouraging a level-playing field for all energy forms. It should also in the spirit of economic liberalization fully deregulate the power sub-sector of the economyto allow for private sector participation in the generation, transmission and distribution of electricity. Also, improvement in the performance of electricity supply should be vigorously pursued.

5.4 Recommendations

Haven completed the study, the researcher recommends that Government expenditures should show financial prudence. Overseas tours by the president and the ministers should be reduced to the minimum. Nigerian diplomatic mission abroad should handle some of the transactions for ministerial visit.

Strenuous effort should be made to promote the sale of Nigerian exports in the world market. The export of primary products should, as much as possible be reduced and this could be achieved if the economy is sufficiently diversified.

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