Nigeria is one of Africa’s most developed, resource-rich countries and yet it has notably failed to provide its people with a reliable electricity supply. That is at last beginning to change.
Five years after the privatisation of Nigeria’s power sector, even the most luxurious Lagos hotels still suffer daily blackouts. The size of the gap between the country’s energy needs and its current provision is daunting.
Although rich in oil and gas as well as hydro and solar resources, Nigeria’s power companies generate only about 4,000MW on a typical day, according to the US Agency for International Development. That is less than one-third of what is required to supply its more than 190 million citizens.
Debate over the gap has now shifted towards off-grid, distributed solutions, where smaller units can generate and distribute power locally rather than through centralised grids.
Out of 137 countries in the Spectator’s index of worst-performing countries in 2017, Nigeria has the second-worst supply of electricity after Yemen. This is shocking, given that Nigeria’s first power station opened as long ago as 1968.
The country became a major oil producer in 1956, has huge gas reserves, and gained independence in 1960. Now Africa’s most populous country, Nigeria has only 12,667MW of installed on-grid electricity capacity, of which as much as half is not operational at any one time.
Despite nearly $20bn having been spent over two decades on increasing electricity capacity, less than half of Nigeria’s population has access to electricity. Electricity is both expensive and unreliable, and many households depend on liquified petroleum gas or wood for cooking, something which is very often done by candlelight. Furthermore, businesses spend almost $14bn a year on imported, expensive and dirty diesel for their onsite generators, creating smog in major cities like Lagos, Abuja and Port Harcourt.
The parlous condition of Nigeria’s power sector is down to a mix of factors, of which perhaps the most important is that, until very recently, it was wholly state-owned and operated with too little spent on maintenance and investment in new power plants, or in transmission and distribution infrastructure. Indeed, no new electric power infrastructure was built between 1980 and 1990.
These factors have combined with startling levels of mismanagement, theft, corruption, and the basic failure to actually collect payments for electricity used, to make Nigeria’s power sector an extremely flawed operation.
To address the problem, Nigeria’s government took some serious steps to combat the country’s problems, including partial liberalisation of the power sector. It established a new national regulatory body, the Nigerian Electricity Regulatory Commission (NERC), and unbundled or broke up the power sector into separate components, namely state-owned grid operators but with contracted-out management. It also partially privatised the distribution network into regional distribution companies (‘discos’) and created six fully privatised independent generating companies (‘gencos’).
In addition to the partial liberalisation of the market structure, the government undertook to substantially increase the country’s on-grid power capacity from a negligible 12,667MW in 2018 to 22,958MW by 2023.
Nigeria has abundant gas reserves of 192 trillion cubic feet (5.4 trillion cubic metres), and gas provides nearly 80 per cent of power generation. Despite this, power stations have found themselves short of gas due to insufficient pipeline capacity, a lack of pipeline connections and sabotage of pipes.