Nigeria’s power sector has been plagued by numerous challenges for decades, raising concerns for many stakeholders. Despite the privatisation of the sector, which was expected to bring development, the sector still faces a liquidity crisis, which has forced the government to intervene. However, analysts have argued that the sector needs more investments, rather than subsidies and government interventions, to ensure reliable power supply.
The federal government plans to spend N1.67 trillion on electricity subsidies in 2024, a huge 170 per cent increase from the N618 billion spent in 2023. Analysts find this increase alarming, especially considering that subsidies have not resulted in consistent power supply. From 2015 to 2023, the government spent trillions on electricity subsidies without achieving significant improvements. The rise to N1.67 trillion this year is attributed to the depreciation of the naira and inflation. The federal government says it has provided N7 trillion in direct interventions by 2023 to support the sector.
According to energy experts, the Distribution Companies (DisCos), which operate in a partially deregulated industry, prefer a cost-reflective tariff, rather than subsidies. Currently, the tariff is set at about N140 per kilowatt-hour, but consumers are paying around N70 KW/h. This situation has left some DisCos in debt. Many believe that the current subsidy approach is unsustainable. Nigeria has a national budget deficit of N9.8 trillion in the N28.8 trillion 2024 budget, and with 98 per cent of government revenue allocated to debt servicing, there are valid concerns about the financial viability of the subsidy system. This, according to stakeholders, means that the sector needs more investments, rather than subsidies, to transform the sector.
The founder of The Tony Elumelu Foundation, Tony O. Elumelu, stressed the urgent need to invest in Nigeria’s power sector. He said that the sector has the potential to drive economic growth and development in the country. The chairman of the board of directors of Eko Electricity Distribution Company (EKEDC), Dr. Dere Otubu, also emphasised the need for increased investment in the power sector to meet the growing energy demand of Nigeria. He said that although progress had been made in reforming Nigeria’s electricity industry, more capital investment was required to expand generation, transmission, and distribution capacities.
An adviser to President Bola Tinubu on energy, Olu Verheijen, said that electricity distribution companies in Nigeria will need an estimated N2 trillion or about $2.5 billion in capital to improve power supply to Nigerians. She added that new investors need to revive the industry that can barely supply power to nearly 200 million people. “We need to set policies that facilitate reorganization and recapitalization and bring in new partners with new capital,” she said.
The immediate past managing director of Abuja Electricity Distribution Company Plc, Engr. Adeoye Fadeyibi, noted that negative cash flow in the industry was affecting operations and the ability to improve power supply to customers. He said that only Eko, Ikeja, and Abuja Discos can continue as a going concern. A power sector analyst, George Amoko, said that the critical roles of the DisCos in the industry must force stakeholders to collaborate and implement solutions in the sub-sector.
Some of the solutions he suggested included promoting a cash-less policy for transactions, engaging in aggressive cash-drive activities, prioritizing service delivery to Maximum Demand (MD) customers, and improving billing and collection efficiencies.
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Olawale Moses Oyewole is an adept writer who stays on top of current events and curate informative and engaging articles for his readers. He is a digital strategist who help brands gain online visibility.
