It is June 1999, mere weeks after the commencement of Nigeria’s fourth republic. The newly appointed Minister of Power and Steel, the late Chief Bola Ige, proclaims, “Power failure will be a thing of the past within six months.” 

Fifteen years later, former President Obasanjo, who appointed Ige, remarked dolefully, “I won’t say Bola didn’t know what he was doing, and he said publicly that he would fix the power problems in six months. After one year, Bola Ige couldn’t fathom what was wrong with power. It was riddled with corruption.”

Subsequent administrations have each tried to address the problem with Nigeria’s electricity. Most famously, Babatunde Fashola stated pointedly, “Power generation is not rocket science; it is just a generator…we have darkness because we have incompetent people managing our economy.” As Fashola now knows—being a former power minister himself—identifying a problem is a necessary but insufficient condition for solving it. To understand why providing uninterrupted power supply has been a perennial headache, let us look at Nigeria's power sector from a historical perspective. 

An Overview of Nigeria’s Power Sector

Nigeria’s first power plant was built in Lagos in 1896, with a generating capacity of 60kW. However, it was not until 1929 that the Nigeria Electricity Supply Company (NESCO) was established as an electric utility company. From 1928 to 1939, eight more power plants were built across Nigeria: Port Harcourt (1928), Kaduna (1929), Enugu (1933), Maiduguri (1934), Yola (1937), Zaria (1938), Warri (1938) and Calabar (1939). In 1950, the Electricity Corporation of Nigeria (ECN) was established and tasked with electricity generation and distribution. In 1962, the Niger Dams Authority (NDA) was created to serve the tripartite purpose of controlling the dams in the River Niger, irrigation and hydropower generation. By 1972, the National Electric Power Authority (NEPA) was formed. It was a vertical integration of the ECN and NDA to streamline the power sector, empower the body through legislation, and be in charge of electricity transmission, generation, and distribution. 

The NEPA period was not particularly memorable, evidenced by its notorious acronym, “Never Expect Power Always.” Under NEPA, power infrastructure was ill-managed and faced minimal investment. By 1998, NEPA had ceased to have an exclusive monopoly on electricity. By 1999, only 19 out of 79 generator plants were operational, working at 28% capacity. In 2001, the National Electric Power Policy (NEPP) was introduced. At the time, Nigeria had nine power stations: three hydro and six thermal, with a total installed generating capacity of 5903MW. 

In his 2002 Independence Day Speech, Obasanjo lamented that he had inherited a “meagre 1500 megawatts” of electricity and promised the “generation, transmission and distribution of 10,000 megawatts by the end of 2005.” That deadline elapsed nearly two decades ago. 

Nigeria’s electricity consumption per capita has historically been deficient compared to other lower-middle-income countries. In 2017, the average Nigerian consumed less than a third of the energy a typical American refrigerator uses.

As of 2023, the national grid’s wheeling capacity stood at 8,100 mW, lower than the peak electricity demand of 19,798 mW and installed generating capacity of 13,014 mW. According to the NERC, in July 2024, the average available capacity was 4915 mW, meaning the plants were operating at 37% capacity.

To understand the challenges facing Nigeria's power sector, we will need to examine the mechanics of its national grid system.

How the National Grid Works

The national grid is a network of transmission lines that transports electricity from where it is generated to where it is needed. It is managed by the Transmission Company of Nigeria (TCN). These transmission lines connect twenty-eight operational power plants (thermal and hydro) to transmission substations. Ideally, if one generator fails, the grid system should ensure the electricity supply continues, maintaining efficiency and optimal consumption.

Generators produce electricity at either 11kV or 16kV. This voltage is stepped up to 330kV or 132kV for long-distance transmission. In areas with a high population density, the voltage is gradually reduced from 330kV to 132kV, then to 33kV (primary distribution voltage) and finally to 11kV (secondary distribution voltage). Operating at a frequency of 50Hz, this is further reduced to 0.415kV for line-to-line connections and 230V for line-to-neutral connections.

In reality, however, the radial transmission lines can bear load losses of 30-40%, combined with increased load demand. This strains power system networks to the limits of their stability thresholds, making them vulnerable to voltage fluctuations. As a result, power blackouts are common. Between 2000 and 2022, the national grid collapsed 564 times, partially or entirely. Therefore, Nigerians are left with no other option but to resort to owning generators as a backup, a very costly venture estimated to gulp an average of $23 billion annually in fuel costs.

Privatisation: Promise vs. Reality in Nigeria's Power Sector

Given its success in the telecoms sector, privatising and deregulating Nigeria's power sector seemed the obvious solution. This move was partly driven by multilateral institutions like the World Bank, which required structural changes in several Sub-Saharan African countries in exchange for funding. The argument was simple: less government involvement and more private sector participation would lead to more efficient resource allocation and a robust national grid.

In November 2005, NEPA was unbundled, and ownership of assets and liabilities was transferred to the Power Holding Company of Nigeria (PHCN). It comprised eighteen companies: the transmission company (TCN), six distribution companies (DisCo), and 11 generating companies (GenCo). This also led to the creation and restructuring of the regulatory body (NERC), Independent Power Providers (IPPs), the invoicing company Nigeria Bulk Electricity Trader (NBET) and the Rural Electrification Agency (REA), among others.

Recently, there have been a few highlights and a spate of regulatory reforms. In April 2024, NERC officially unbundled the TCN into two entities: the Nigerian Independent System Operator Nigeria Limited (NISO) and the Transmission Service Provider (TSP). The TCN also reported that national grid collapses had declined by 76.47% in five years (See Figure 4 above). Metered customers increased by 11.3% from 5.31m in Q1 2023 to 5.91m in Q1 2024. These milestones, however, are overshadowed by a myriad of other problems raising the question of whether privatisation has delivered on its high promise.

A fundamental challenge, as argued by a former chairman of the NERC, is that Nigeria’s privatisation was founded on wrong modelling, which was based on a misdiagnosis. The problem with the power sector was simplistically presented as state ownership, with privatisation as the magic cure leading to a quick sell-off of state-owned infrastructure when corporatisation and commercialisation should have happened first. In his words,  “Privatisation has not worked because its economics relies on the famous agent-principal problem and soft budget line, which wrongly presumes that ownership rather than governance determines efficiency.” In 2012, before privatisation, the sector metering rate was about 40%. As of June 2024, the metering rate had only marginally risen to 44%. 

The government planned to phase out estimated billing by 2024, following President Bola Tinubu's $500 million loan request under the Nigeria Distribution Sector Recovery Program (DISREP). This is, however, unlikely to happen soon. According to the National Bureau of Statistics (NBS), customers on estimated billing rose by 10% from 5.83 million in Q4 2023 to 6.43 million in Q1 2024, outpacing metered customers. This leads to different scenarios. DisCos will find it challenging to track and collect payments on schedule from millions of customers, which comes at a loss to them. Thus, they are incentivised to cater to metered customers, which encourages discriminatory allocation and pricing by introducing electricity bands operating on different tariffs. The DisCos in the largest demand centres (Ikeja, Eko, Abuja) get a higher share of electricity over time, but at the expense of the rest. There are other challenges, too, such as sourcing compressed natural gas (CNG) that powers most plants. Gas companies supply a gas quota to electricity companies at prices lower than international rates under the domestic supply obligation operational framework of the Gas Master Plan (GMP). However, thermal plants must fight an uphill battle to secure viable gas contracts at the approved price. This critical input is paid for in dollars, adding to operating costs. Investors who took loans to invest in power infrastructure have to recoup their investments, making further private investments less appealing unless there is a clear path to profitability. Additionally, infrastructural revamping and vandalism are concerns that must be addressed.

Off-grid Solutions as the Way Forward

A direct correlation exists between economic growth and electricity supply. A report by the NBS notes that electricity generation, transmission and distribution account for less than one percent of Nigeria’s GDP. Energy is wealth. There are no rich countries that are energy-poor.

In a sense, Nigeria’s electricity network is a physical embodiment of the “anti-gestalt” wherein the whole is less than the sum of its parts. The few success stories that exist in the power sector are off-grid. In 2015, embedded power solutions provider Viathan commissioned a 15km distribution network from Lekki to Ikoyi, setting up a PIPP plant to power the Lagos State government. It now operates at least 7 generation plants in Lagos spread across a 120-km network.

In June 2024, it was reported that the Dangote refinery, established in 2018, had already generated 1500 mW in electricity output. In stark contrast, it took Nigeria eleven years to add about half that (760MW) to the national grid. The Redemption City, a vast expanse of real estate managed by Nigeria’s largest pentecostal church and based in Ogun State, also operates off-grid, powering its thousands of residents on a 25 mW power station with only 15 mW in use and at a much lower tariff than Band A customers on the national grid. 

According to the International Energy Agency (IEA), four out of five people who have yet to gain access to electricity live in remote, sparsely populated areas with low levels of existing energy demand. Extending electricity grids to these areas can be expensive with long lead times, and off-grid systems offer a pragmatic way forward. They are already gaining widespread adoption: in 2023, 50% of new connections in Africa were delivered through off-grid systems. 

A more decentralised approach to power generation that combines grid extension, battery-integrated mini-grids, and stand-alone off-grid solar solutions could be the key to electrifying Nigeria. This viewpoint makes the NERC’s recent development of issuing mini-grid generation permits to companies like Golden Penny Power Limited and MTN Nigeria a welcome idea and must be encouraged.

Nigeria's electricity challenges, rooted in historical mismanagement, flawed privatisation models, and infrastructural deficits, are not insurmountable and have been solved elsewhere. The path to reclaiming its status as Africa’s economic giant must move beyond rhetoric. As has been made abundantly clear, achieving that begins with a simple yet profound biblical imperative: “Let there be light.”

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