The Nigeria Power sector is actively seeking financial help of $2.5 billion to tackle the existing capital shortfall.
Nigeria Power Sector
Nigeria’s electricity sector is grappling with a substantial capital deficit of around N2 trillion ($2.5 billion), highlighting the urgent need for investments to rejuvenate an industry struggling to meet the power needs of its 200 million citizens.
As reported by Bloomberg, Olu Verheijen, an energy adviser to President Bola Tinubu, emphasized the industry’s financial strain, pinpointing the necessity for fresh investments to address distribution challenges faced by households.
Nigeria continues to combat power deficiencies due to pricing disparities, irregular revenue collection, and a deteriorating national grid.
Many Nigerians rely on generators due to these challenges, with the national grid supplying only around 1,000 megawatts to cities like Lagos, home to 25 million people. In contrast, a city like Shanghai, with a similar population size, provides over 30,000 megawatts at peak demand.
Verheijen stressed the need for policy reforms to facilitate restructuring, improve capitalization, and attract new investors, without specifying a detailed timeline or plan.
President Tinubu had earlier pledged to enhance Nigeria’s electricity supply. Efforts towards recapitalization are expected to align with tariff adjustments aimed at reflecting actual costs, potentially stabilizing the financial standing of the power sector.
The Nigeria Electricity Regulatory Commission, under government control, sets tariffs, impeding power firms from covering distribution expenses. As a result, the government subsidizes these firms to bridge the financial gap. Without tariff revisions, coupled with currency devaluation and rising inflation, energy subsidies could surge from 600 billion naira in 2023 to 1.6 trillion naira this year, posing additional fiscal challenges for the government.
Despite having an installed capacity of 13,000 megawatts for electricity generation, Nigeria struggles to distribute only 4,000 megawatts, highlighting inefficiencies in power distribution.
In comparison, South Africa, facing economic challenges and power shortages, boasts approximately 52,000 megawatts of capacity, primarily sourced from a state-owned utility grappling with aging infrastructure and financial strain. The disparities underscore the pressing need for comprehensive reforms and investments in Nigeria’s electricity sector to ensure sustainable and reliable power supply.
