Nigeria's 216 million population faces energy supply constraints due to inefficient power generation and distribution. The poor electricity supply, which averaged 4,249.10MW in the first quarter of 2024, is enough to supply less than 10% of the population with stable electricity. This inadequate electricity supply is evident in the country’s per capita consumption of just 169 kWh in 2022, compared to 3,986 kWh in South Africa and 1,810 kWh in Egypt, its peers.
The poor supply and distribution of electricity has led to excessive costs for citizens and producers and created an inaccessible electricity market. A failure to restructure Nigeria’s energy infrastructure, coupled with the country’s growing population, strains the country’s poor electricity supply and accelerates political instability.
Nigeria’s Energy Mix Today
According to the Nigerian Electricity Regulatory Commission (NERC), in the first quarter of 2024, Nigeria’s energy production consisted of twenty-seven (27) grid-connected power plants, nineteen (19) gas, four (4) hydro, two (2) steam, and two (2) gas/steam-powered plants, representing a -13.68% decrease (-673.16MW) compared to the 4,922.26MW recorded in 2023/Q4. 17 of the 27 grid-connected plants recorded decreased available generation capacities in the year's first quarter. So, despite having a population of over 200 million, Nigeria’s energy sector only services 12.3 million total customers—5.91 million metered customers and 6.43 million estimated customers.
State of the Industry and Government Promises
Nigeria’s poor electricity generation affects everyone in the industry, especially the producers and distributors. Distribution Companies recorded a reduced offtake for Q1 2024 and a billing efficiency of 80.45%. The total energy received by all DisCos in Q1 2024 was 7,171.93GWh, and the energy billed to end-use customers was 5,769.52GWh. This means Nigeria barely produces enough energy to service its size and needs.
Solving Nigeria's electricity supply challenges requires practical, reliable solutions for the generating and distribution companies. These measures would enhance power distribution efficiency, bringing Nigeria closer to 90% electricity access, as Egypt and South Africa achieved. In line with this goal, the Nigerian government announced in September 2024 an $800 million disbursement under the Presidential Power Initiative to construct new substations and expand distribution networks.
Lawmakers must also consider the effect of Nigeria’s rising population on its grid. With an average birth per woman in Nigeria of 5.1, compared with 2.9 for Egypt and 2.3 for South Africa, Nigeria would need to produce and supply electricity at standards better than both countries to even have anything resembling a grid for the next three decades. This leaves a lot of work for policymakers and a complete rethink of power sector strategy.
Energy Sector Reform - Hydropower
Despite having access to two of West Africa's main rivers, the Niger and Benue, Nigeria produces only about 20% of its electricity from hydro sources, compared to over 60% in Brazil and nearly 100% in Ethiopia, where the recently built Grand Ethiopian Renaissance Dam (GERD) provides water from the Nile. The GERD alone can produce over 6,000 MW, which exceeds the combined output of Nigeria’s 27 power generation sources.
Brazil, on the other hand, boasts over 150 dams located mainly in the north of the Amazon River Basin—these dams service electricity demand centres along the eastern coast, particularly in the south. Brazil still faces challenges due to the distance between hydropower generation and demand centres. However, the Latin American nation has offered a blueprint for maximising hydropower sources for national development.
Maximising Nigeria’s hydro resources will not only ensure a reliable energy supply for consumers but also play a critical role in economic diversification. Hydropower is a green and reliable source, and when combined with upgraded gas infrastructure, it offers a balanced and sustainable energy mix.
A hydro-energy plan requires a national commitment that prioritises maintenance and addresses ongoing issues, which should be Nigeria’s focus to solve its current supply challenges. With energy infrastructure currently serving only 12 million customers—less than 10% of the population—it is clear that energy upgrades are necessary.
Lessons from Egypt and Ethiopia
Nigeria’s recurring power supply issues mean only 59.50% of Nigerians have access to energy, which is way below the 100% achieved by Egypt and just over 99% by India, considered by global standards as “Nigeria’s peers.”
In 2014, the Egyptian government took a different approach to power sector reform after years of subsidised electricity provision. The subsidised energy came alongside underinvestment in the power sector, which led to a power crisis in North Africa. Egypt changed its approach by committing to a comprehensive power sector reform program as part of a larger macroeconomic reform planned in collaboration with the IMF and the World Bank.
Egypt's steps include subsidy reform in the fuel and power sector, which reduced energy subsidies from 6.8% of GDP in 2014 to 1.4% in 2019, even after accounting for almost 100% of currency devaluation in 2016. The reform initiated a long-term reorganisation of the sector and attracted investment from the private sector. The Egyptian government also committed to bringing the tariffs in line with the supply costs over a specific period by making the electricity price and subsidy reform public. Adjustments were publicly announced, and justifications were provided for the price increments.
Egypt adopted a new electricity law in 2015, which issued a three-year transition period for the Egyptian Electricity Holding Company to become a transmission system operator independent from generation and distribution. This came alongside a law to encourage private sector investment in renewable energy. This development attracted significant private investments in the Egyptian power sector. At the same time, public investments in conventional power, including the 14,400 MW power deal concluded with Siemens in 2015, developed the industry.
In 2011, Ethiopia rose to combat power shortages. Before that, less than 45% of its population had access to electricity through the Grand Ethiopian Renaissance Dam (GERD) along the Blue Nile River. The GERD, with an installed capacity of 5.15 gigawatts (GW), is Africa’s largest hydropower plant and one of the largest 20 dams in the world. It began producing electricity in 2022, with plans to use the facility as an export hub, supplying power to South Sudan and other neighbouring countries, including Kenya and Tanzania.
As seen with the lack of fiscal and monetary support for the 2013 electricity diversification under the Buhari presidency, Nigeria's economic potential is hindered by inconsistent government policy. To advance hydropower generation, the government must also adhere to the revised Electricity Act, which enables states to generate and distribute their own power, making it possible for states on river basins to build and maintain their dams.
An Ideology of Urgency
The priority of the Nigerian political class should be adopting the Ethiopian political urgency in dealing with power supply issues. This should be followed by maximising a reliable energy source (hydro) for national development. The gains from Nigeria’s power sector reforms were not followed through with aligning fiscal adjustments as was done in Egypt, reducing Nigeria’s population of over 200 million individuals to less than 5,000MW, which is insufficient for a much larger industrial policy.
Nigerian governments have promised since the 1970s to diversify Nigeria's economy away from crude oil and towards a dynamic industrial economy, with hydrocarbon exports being a catalyst for the energy infrastructure required for economic diversification. Existing electric car sales in China and the West show that Nigeria is stuck between a rock and a hard place regarding its future. Nigeria currently faces challenges with economic diversification, including low crude oil production due to neglect, mismanagement of Nigeria's existing downstream infrastructure, and crude oil theft in Nigeria's oil field communities as Nigeria lost over 619.7 million barrels of oil valued at $46.16 billion to various forms of oil theft and pipeline vandalism between 2007 and 2020
The rapid rise in electric vehicle sales should alarm both the Nigerian political elite and the public, as a failure to diversify the economy and energy production now could lead to dire consequences by 2050. China saw electric vehicles grow from 6% to 38% of new car sales between 2020 and 2023, while the U.S. experienced a jump from 2% to 10% in the same period. Nigeria, however, lacks the electricity capacity in 2024 to move away from crude oil by 2040, a challenge its leaders may not yet fully grasp.
A new national ideology on urgency is needed, prioritising government economic policy alongside fiscal and monetary planning. For Nigeria, the first step to ensure international funding for hydropower projects would be reducing government waste, as foreign funding requires evidence of fiscal prudence. If there is no environment of fiscal prudence at the executive level, foreign development funding for hydro dams, which utilise Nigeria's water resources for power production, will not come.
References
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