Nigerian power providers are short of an estimated N2 trillion ($2.5 billion) in capital and require fresh investors to revitalise a sector that can barely power its 200 million citizens.
Power firms in Nigeria are over-leveraged and under-capitalized, limiting their ability to invest in distributing electricity to families, according to Olu Verheijen, an energy adviser to President Bola Tinubu, according to Bloomberg.
Nigeria generates and delivers between 3,500MW and 4,500MW to its 36 states and the Federal Capital Territory, serving millions of citizens. As of 6 a.m. on Thursday, the country’s power generation stood at 4,582.49MW.
Inadequate pricing, patchy revenue collection and a dilapidated national grid have left most residents in Africa’s most populated nation to produce their power using noisy generators.
Take the case of Lagos. The grid delivers only 1,000MW to a city of 25 million people. By contrast, Shanghai, with roughly the same population, supplies more than 30,000MW at peak demand.
“We need to set policies that facilitate reorganisation and recapitalisation and bring in new partners with new capital,” the adviser said, without providing a date or more details for the plan.
President Bola Tinubu pledged on January 1, 2024, to improve the electricity supply in the West African nation.
The recapitalisation will accompany plans to make electricity tariffs cost-reflective, which will improve the liquidity and viability of the power sector, Verheijen said.
While the country privatised generation and distribution in 2013, tariffs are set by the Nigeria Electricity Regulatory Commission, a government-controlled body.
Power firms are not allowed to charge enough to recover the cost of distributing electricity, with the government paying the difference as a subsidy to companies in the sector.
Without a tariff review, weakness in the naira — which slumped 50 per cent against the dollar last year — and accelerating inflation could push energy subsidies to N1.6tn this year from N600bn in 2023, according to the regulator.