Master’s degree thesis LOG950 Logistics Source of Market and Government Failure in Power and Industrial Sector in Nigeria: A case Study on Lekki Free Zone Adebowale Sheriff Adekoya Number of pages including this page: 87 Molde, 23.05.2016 Mandatory statement Each student is responsible for complying with rules and regulations that relate to examinations and to academic work in general. The purpose of the mandatory statement is to make students aware of their responsibility and the consequences of cheating. Failure to complete the statement does not excuse students from their responsibility. Please complete the mandatory statement by placing a mark in each box for statements 1-6 below. 1. I/we hereby declare that my/our paper/assignment is my/our own work, and that I/we have not used other sources or received other help than mentioned in the paper/assignment. 2. I/we hereby declare that this paper Mark each 1. 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I am/we are aware that Molde University College will handle all cases of suspected cheating according to prevailing guidelines. 6. I/we are aware of the University College’s rules and regulation for using sources Publication agreement ECTS credits: 30 Supervisor: Heidi Hogset Agreement on electronic publication of master thesis Author(s) have copyright to the thesis, including the exclusive right to publish the document (The Copyright Act §2). All theses fulfilling the requirements will be registered and published in Brage HiM, with the approval of the author(s). Theses with a confidentiality agreement will not be published. I/we hereby give Molde University College the right to, free of charge, make the thesis available for electronic publication: yes no Is there an agreement of confidentiality? yes no (A supplementary confidentiality agreement must be filled in) - If yes: Can the thesis be online published when the period of confidentiality is expired? yes no Date: 24.12.2020 Table of Contents 1. INTRODUCTION ........................................................................................................................... 1 1.1. Objectives for the Thesis, Problem definition, Research questions, and Limitations ........ 3 1.2 Problem Statement ................................................................................................................... 3 1.3 The research questions ............................................................................................................. 4 1.4 The Objective of the research ................................................................................................... 5 1.5 Research Methodology ............................................................................................................. 5 1.6 Theoretical Framework ............................................................................................................. 6 1.7 Research Strategy ..................................................................................................................... 7 1.8 The structure of the Thesis .................................................................................................... 8 2. Theoretical Approach .................................................................................................................. 10 2.1 Theoretical Approaches: ......................................................................................................... 10 2.2 Theoretical Framework on Power .......................................................................................... 11 2.3 Role of the Government on Electricity Market....................................................................... 12 2.4 Monopoly Market ................................................................................................................... 13 2.5 Types of Market Failures ........................................................................................................ 15 2.6 The Role of Government in Market Economy ........................................................................ 16 3. About FTZs and Other Economic Zones ...................................................................................... 19 3.1 Difference between FTZ and FTA .......................................................................................... 19 3.1.2 Types of Economic Zones ............................................................................................... 19 3.2 Reasons for the Use of FTZs ................................................................................................. 20 3.2.1 FTZ- Cost Benefit Analysis ............................................................................................ 21 3.3 FTZ- Nigerian Perspective ..................................................................................................... 21 3.4 About NEPZA ......................................................................................................................... 24 3.5 The Calabar Free Trade Zone .................................................................................................. 25 4. Introduction on power (electricity) Sector ................................................................................... 26 4.1 Review on Power in Industrial Sector ..................................................................................... 27 4.2 Nigeria and the Power Industrial Sector ................................................................................. 28 4.2.1 Overview of the Power Sector in Nigeria ............................................................................ 30 4.3 The Nigerian Power Sector ..................................................................................................... 32 4.4 Investment in Power ............................................................................................................. 36 4.5 The Reform, its challenges and Opportunities ....................................................................... 37 4.5.1 The Reform ...................................................................................................................... 37 4.5.2 Challenges in the Nigerian Power Sector ......................................................................... 39 4.6 Challenges Facing Electricity Market in Nigeria ...................................................................... 42 4.6.1 Structure of the Electricity market in Nigeria .................................................................. 44 4.6.2 Reform and the Bulk Trader ............................................................................................ 46 4.6.3 Fundamentals of the Electricity Market .......................................................................... 46 4.7 Market Failure ........................................................................................................................ 47 4.7.1 The case of Market failure on electricity in Nigeria ......................................................... 47 5. About Lagos State and FTZ ........................................................................................................... 50 5.1 Policy on FTZs in Lagos ............................................................................................................ 50 5.1.1 Policy framework for investment in Lagos State ............................................................. 50 5.1.2 Free Trade Zones and investments incentives ................................................................ 50 5.2 Case Study: Lekki Free Zone ................................................................................................... 51 5.2.1 Overall Layout and Industrial Orientation ....................................................................... 52 5.2.2 Investment Advantages ................................................................................................... 53 5.2.3 Market Potential and Prospect ........................................................................................ 54 5.2.4 Share Capital Structure for LFZ ........................................................................................ 54 5.2.5 Economic Impact and Business Environment .................................................................. 56 5.3 Contribution of FTZ on the Power Generation in Nigeria ....................................................... 58 5.4 How FTZ can contribute to the Development of the Power Sector in Nigeria ....................... 59 5.5 The Situation of Power (Electricity) at the Lekki Free Zone.................................................... 61 5.6 Challenges and Recommendations