An Economic Assessment of the Reform of Nigerian Electricity Market

An Economic Assessment of the Reform of Nigerian Electricity Market

File Size770.90 KB
Create DateNovember 10, 2016

This paper makes a critical assessment of the proposed reform of the electricity market in Nigeria. It highlights some of the challenges such as severe electricity crisis due to the appalling state of power infrastructures, double digit transmission losses and low tariffs. Empirical investigation was conducted using a Linear Programming optimization model via General Algebraic Modelling System (GAMS) to analyse the impacts of electricity price and distribution losses on the industry pre- and post- electricity reform era. The paper concludes that the reform would be beneficial to the country. The study identified that an upward review of prices and reduction in transmission losses are essential in incentivising investor but the success of the reform depends on government commitment and huge investment.

Recommendation to the government based on the research is that an upward review of prices would make the market more viable for investment especially in the generating segment. Also, the transmission network would play a major role in incentivising firms to invest in the generating segment and ensuring that demand points in the country are met. It also reveals to the government that there is spatial distribution of prices. Hence, a standard price for all plants might not be appropriate.

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