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Stakeholders and Experts Give Reasons Why the Energy Sector of Nigeria Performs Below Expections

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The partial privatization of Nigeria’s power sector in 2013 was meant to attract new investments, improve service delivery, and resolve chronic electricity shortages. However, eleven years later, the sector struggles with similar issues, including low power generation and extensive electricity access gaps. Despite these intentions, data from the World Bank indicates that over 80 million Nigerians, primarily in rural areas, still lack access to electricity.

In 2024, Nigeria's power generation remained just above 4,000 megawatts (MW) on average, despite having an installed capacity of 13,000 MW. The Minister of Power, Chief Adebayo Adelabu, set a target of achieving 6,000 MW by the end of the year, but this goal was unmet due to several factors. These included frequent grid collapses, financial instability within the sector, and an unclear path for growth from sector administrators.

The Nigerian Electricity Regulatory Commission (NERC) reported that out of 28 power plants on the grid, only 5,100 MW of capacity was available, with an average hourly generation of 4,280 MW. Stakeholders and experts argue that the reasons for the low performance of the energy sector of Nigeria are among other things, incessant grid collapses and crippling debts owed the GenCos. The Executive Director of the Association of Power Generation Companies, Dr. Joy Ogaji, cited outstanding debts to generation companies (GenCos) as a significant factor in reduced capacity. As of August 2024, the debt owed to GenCos reached N1.495 trillion, with only 20.96% of invoices paid by the Nigeria Bulk Electricity Trading Plc (NBET).

Prominent figures like Tony Elumelu, Chairman of Transnational Corporation (Transcorp Plc), highlighted the liquidity challenges in the sector, noting that Transcorp Power alone was owed around N250 billion. He urged the government to fully privatize the power sector by divesting its stakes in electricity distribution companies (DISCOs) and the Transmission Company of Nigeria (TCN).

Professor Adeola Adenikinju from the Centre for Petroleum, Energy Economics, and Law, University of Ibadan, expressed surprise at the GenCos’ debt levels given the revenue collected by DISCOs. He called for increased pressure on DISCOs to reduce Aggregate Technical, Commercial, and Collection (ATC&C) losses, freeing up more revenue to pay GenCos.

The TCN, responsible for managing the National Power Grid, remains a weak link in the electricity supply chain, with twelve grid collapses reported in 2024. Despite $7.5 billion in government and borrowed funds aimed at improving this segment, problems persist. NERC ordered the unbundling of TCN into the Transmission Services Provider (TSP) and the Nigerian Independent System Operator to manage the grid more effectively. TCN blamed some grid collapses on sabotage and vandalism, reporting 115 transmission towers destroyed by vandals by the end of November 2024.

In April 2024, NERC removed government subsidies for electricity consumers in Band-A in exchange for a guaranteed minimum supply of 20 hours daily. This policy affected about two million customers but faced pushback from consumers and the Manufacturers Association of Nigeria (MAN). Despite complaints about inconsistent power supply, NERC defended the policy, citing increased DISCO revenue from N100 billion in March to N142.9 billion in April.

Critics like Kunle Olubiyo, President of the Nigeria Consumer Protection Network, condemned the policy as discriminatory. He argued that it created a divide based on wealth, with richer consumers receiving more reliable energy.

Metering remains a significant issue, with 55% of the 12 million registered customers still without meters. Despite promises from the Minister of Power, Chief Adebayo Adelabu, to implement phase two of the National Mass Metering Programme, progress has been slow. Chief Princewill Okorie from the Electricity Consumers Protection Centre criticized the continued use of estimated billing, leading to customer exploitation.

Experts like Prof. Adenikinju and Lanre Elatuyi from Paras Energy have expressed disappointment with the sector’s performance, citing outdated infrastructure and high levels of vandalism. Adenikinju graded the sector's performance as "red," indicating poor outcomes despite increased costs and tariffs. Olubiyo noted that many promises from the government and operators remained unfulfilled, leaving the sector trapped in a cycle of unmet potential.

Elatuyi pointed out that the sector had not met the government's 6,000 MW generation target, further highlighting the need for realistic targets and improved accountability.


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