Power sector reforms raise hopes, yet challenges linger

The Nigerian power sector has experienced a turbulent journey over the years. Since its privatisation in November 2013—which unbundled the sector into three components: Generation, Transmission, and Distribution—efforts to revitalise electricity supply have largely fallen short of expectations. For many Nigerians, privatisation has failed to deliver the promised stability, making reliable power supply an elusive dream. Yet, the importance of consistent electricity to economic growth cannot be overstated.

The absence of stable power has crippled small-scale industries and artisans, forcing many out of business. According to the Manufacturers Association of Nigeria (MAN), electricity shortages cost the Nigerian economy approximately N10 trillion annually—about two percent of the GDP. This chronic deficit has positioned Nigeria among the most challenging environments for business, ranking 171 out of 190 countries on the World Bank’s Ease of Doing Business index. Recognising this challenge, the Tinubu administration took decisive action early in its tenure to reposition the sector.

In the past two years, the government has introduced reforms and laid down frameworks aimed at a transformative shift in the electricity landscape. One of the most significant moves was the recent approval of the National Integrated Electricity Policy (NIEP), a roadmap for the Nigerian Electricity Supply Industry (NESI). First submitted in December 2024, the NIEP seeks to unlock $122.2 billion in investments between 2024 and 2045 to revitalise the sector. The policy aligns with the revised Electricity Act 2023 and promotes energy diversification, aiming to move beyond reliance on hydropower and gas.

ead, the roadmap envisions integrating solar, wind, hydrogen, biomass, nuclear, and carbon capture technologies. It also earmarks $192 million over five years (2024–2028) to strengthen transmission infrastructure. “This policy marks a significant evolution from the outdated 2001 National Electric Power Policy. It enables the growth of state-level electricity markets and decentralised energy planning,” said Power Minister Adebayo Adelabu. “It’s a living document that evolves with the sector’s needs, stressing innovation, collaboration, and consumer protection.”

The administration has set an ambitious goal: to achieve at least 8,000 megawatts (MW) of power generation by 2027. According to Adelabu, the country has already seen progress. On March 2, 2025, Nigeria recorded an all-time high available generation capacity of 6,003MW, followed by a peak generation of 5,801.44MW two days later. Average daily generation for the first quarter of 2025 stood at 5,700MW, up from 4,100MW in Q3 2023—an increase of 1,600MW, representing a near 40% growth since the administration took office. “It took Nigeria four decades to hit 4,000MW.

In just 18 months, we’ve added 1,700MW. If this momentum is sustained, we’re confident of reaching our 8,000MW target by 2027,” Adelabu affirmed. The administration has also made strides in recovering dormant capacity. Through strategic interventions at the Niger Delta Power Holding Company (NDPHC), 232.5MW was restored from idle assets at the Omotosho and Benin power plants. Additionally, decentralised energy projects have begun to light up rural communities. Notable projects include a 550kWp mini-grid in Bakin Ciyawa and Kwande (Plateau), a 440kWp installation in Cross River, a 990kWp grid serving 3,900 households in Niger State, and a 510kWp solar hybrid grid across Osun State. These interventions signal a new dawn—one where Nigeria’s power sector can finally meet the aspirations of its citizens, power its industries and stimulate economic growth.

In recent months, the Niger Delta Power Holding Company has ramped up construction, upgrades, and installations of critical infrastructure across the country. This includes 14 new transmission lines and the rehabilitation of existing ones, such as the 2x132kV line bay extension at the TCN Papalanto substation in Ogun State and the 65km 330kV double circuit Afam–Ikot Ekpene transmission line. Notably, the government is also facilitating the full evacuation of electricity from key hydropower assets. At present, the Zungeru Hydropower Plant is evacuating 550MW of its 700MW capacity, while the Kashimbila Plant is operating at its full 40MW capacity. Beyond this, early-stage development of the Makurdi Hydro Project — with a potential capacity of 1,500MW — is underway, alongside efforts to revitalise the Kaduna Thermal Plant.

Once stalled for six years, the 215MW Kaduna plant is now 87 per cent complete and expected to be operational by the end of 2025. Yet, beneath the impressive figures and initiatives lies a stark challenge: the financial distress of the Generation Companies (GenCos). Mounting debts owed by Distribution Companies (DisCos) have placed a significant burden on GenCos, hampering their ability to operate efficiently. In response, President Bola Ahmed Tinubu recently convened a crucial meeting with the leadership of Nigeria’s power-generating companies to address the N4 trillion debt threatening the sector — N2 trillion of which accrued in 2024 alone, with the rest being legacy debts. The GenCos have expressed grave concern about their diminishing capacity to service loans, maintain infrastructure, and invest in expansion. Col. Sani Bello (Rtd), Chairman of Mainstream Energy Solutions and head of the Association of Power Generating Companies (APGC), warned of a potential collapse of the sector without urgent intervention.

Echoing this, Kola Adesina, Chairman of Egbin Power and First Independent Power Limited, described the situation as a national emergency, underscoring the vital role of electricity in powering industries, homes, and hospitals. Dr. Joy Ogaji, CEO of APGC, further highlighted systemic issues such as irregular gas supply, payment defaults, and foreign exchange volatility — noting the naira’s sharp depreciation from N157 to over N1,600 per dollar in a decade.

Considering these challenges, President Tinubu’s administration has reinvigorated the Presidential Power Initiative (PPI), giving a fresh boost to the long-standing Siemens project. Originally conceived in 2018 to expand Nigeria’s electricity generation, transmission, and distribution capacity, the PPI is being driven with renewed vigour to support national development and economic growth.

The President fast-tracked the project through the signing of an Acceleration Agreement shortly after taking office. This move paved the way for key milestones, including a redefined technical roadmap. Under this plan, Siemens Energy will focus exclusively on upgrading transmission infrastructure via a turnkey approach, while the distribution scope will be handled by other reputable Engineering, Procurement, and Construction (EPC) firms with strong financial and technical capacities. The overarching goal is to add 4,000MW to the national grid by 2026, with an additional aspirational target of 2,000MW — as directed by the Economic Management Team in 2024.

Already, the pilot phase has seen the successful installation and commissioning of 10 power transformers and 10 mobile substations across the country. In 2024, the initiative focused on consolidating these gains and launching the main phase of the project. In parallel, the Federal Government-owned FGN Power Company has completed several transmission projects under the PPI banner, collectively adding over 700MW in transmission wheeling capacity to industrial zones, homes, businesses, and institutions. Strengthening transmission and distribution capacity Transmission remains a central pillar of Nigeria’s electricity overhaul.

Under the PPI’s pilot phase, infrastructure upgrades across 13 locations added 700MW to the grid. Between 2024 and 2025, more than 70 new transformers were installed by the Transmission Company of Nigeria (TCN) using a mix of internally generated revenue and external support from the World Bank and African Development Bank’s Nigeria Electricity Transmission Project. These upgrades have expanded the grid’s transformation capacity by over 12,000MVA. Furthermore, the 2025 Appropriation Act includes a ₦25 billion allocation for the completion of ongoing transmission projects. Structural work is also progressing to regionalise the national grid through the Eastern and Western Supergrid frameworks — a move aimed at improving resilience and minimising system collapses. In the distribution space, ongoing reforms are targeting underperforming DisCos.

Regulatory agencies have instituted stricter performance monitoring mechanisms to ensure accountability and service improvements. The Ministry of Power has also expanded energy access through initiatives like the Energising Education Programme (EEP) and the Distributed Access to Renewable Energy Scale-up (DARES) initiative. The EEP, which aims to provide reliable, clean energy to 37 federal universities and 7 teaching hospitals, has seen seven of these projects completed and ready for commissioning. In a further push to localise power innovation, the Rural Electrification Agency (REA) signed a landmark agreement with Oando Clean Energy to establish a 1.2GW solar power plant with an integrated recycling line for solar panels. This is expected to significantly boost sustainability and local content in the renewable energy ecosystem.

At a recent energy sector engagement, Adelabu laid bare the stark reality threatening the backbone of the nation’s electricity transmission system: inadequate financing. He raised an urgent call for the Transmission Company of Nigeria (TCN) to be included in national appropriation, warning that the agency’s sole reliance on Internally Generated Revenue (IGR) is no longer sustainable. “They are short of funds; they operate solely on their IGR, which has been nose-diving over the years,” Adelabu lamented. “What they get monthly cannot even pay salaries, let alone maintain ageing infrastructure or expand transmission networks.” This admission comes amid wider conversations around the deteriorating state of Nigeria’s power sector—a complex web of dysfunctions that has left millions in darkness, stalled industrial productivity, and strained critical institutions like universities and hospitals.

Perhaps the most damning indictment in the sector lies with the Distribution Companies (DisCos), whose decade-long performance has, by the Minister’s own admission, fallen woefully short. “We need to get tough with the DisCos,” Adelabu said pointedly. “Whatever we do in generation does not mean anything to consumers if it is frustrated at the distribution points.” Originally expected to be backed by technical partners during the 2013 privatisation, many DisCos merely paid lip service to such partnerships, which, in most cases, dissolved within months. Instead of channelling investments into improving infrastructure, stakeholders allege that many investors prioritized debt servicing over service delivery. This gap has stoked public anger. The push for cost-reflective tariffs—a key reform being promoted by the Ministry—has triggered widespread backlash. Critics argue that such pricing mechanisms are premature in the absence of metering and accountability.

Writing in a national newspaper, columnist Tunji Adegboye called the tariff reform “a ruse” in a system where over seven million customers are billed based on estimates. “I have paid N436,600.58 in just a few months due to questionable estimated billing by Ikeja Electric. They yank off 60 percent of every amount I vend, giving me only 40 percent value,” Adegboye recounted, questioning how a N132,000 disparity arose due to the absence of a functioning prepaid meter. Stakeholders suggest that subsidies should be diverted from the DisCos and used instead to fund local meter manufacturing firms. Mass deployment of meters, they argue, is a more just and impactful intervention.

A further layer of controversy surrounds the banding system, which classifies consumers into tariff groups based on hours of supply—Band A receiving the most power at the highest rates. This system, while designed to incentivise improved supply, has sparked allegations of social injustice. Power is disproportionately channelled to high-paying urban clusters, leaving rural and low-income communities languishing in blackout. Even essentials public institutions are not spared. Universities, hospitals and research institutes, classified under Band A, have been saddled with crippling electricity bills. Earlier this year, the Benin Electricity Distribution Company (BEDC) disconnected the University of Benin (UNIBEN) over a disputed bill exceeding N250 million—triggering student protests and a near standstill in academic activities.

At least 10 public universities with the highest 2024 budgets have reportedly spent over N75 billion on electricity alone. UNIBEN’s monthly bill surged from N80 million to N280 million under the new tariff regime. Ahmadu Bello University (ABU) reportedly faces monthly bills of N300 million. Immediate past Vice Chancellor of the University of Lagos, Prof. Oluwatoyin Ogundipe, put it bluntly: “No Nigerian university, particularly a public one, can afford the electricity costs imposed by the DisCos.” UNILAG’s power bill for 2021 stood at N1.7 billion. The government subsidy? A meagre N150 million—and it was never fully disbursed. The industrial sector, too, is reeling under the pressure.