Nigeria, the largest economy in Africa, is facing a serious energy gap which urgently needs to be addressed due to the country’s rapidly growing population. The government aims to boost electricity access from the current 45% to 90% by 2030, which will require significant investment in the power sector. However, the country’s current installed capacity of 12,500 megawatts is only delivering 3,200 megawatts in practice, highlighting the need for reform.
To attract investment to the energy sector, the government must conduct a power asset inventory and audit to determine priority investment needs across the value chain. This will help identify the funding required to replace or repair assets and enable the government to resolve long-standing government liabilities to the electricity sector. It is also essential to create fiscal rules for future payments to prevent debt buildup and increase the capital allocation for the Transmission Company of Nigeria (TCN), including an analysis of its budget performance. Considering the privatization of TCN could also lead to more efficiency and private investment.
Barriers in the gas-to-power value chain must also be solved. This can be achieved by launching a federal coordination mechanism covering gas supplies, generation, transmission, and distribution. Enforcing existing penalties for payment default along the value chain will also help streamline the process.
In addition, planning for renewable energy integration is crucial. Completing the development of the planned solar plants and investing in new grid infrastructure to facilitate the integration of intermittent sources can lead to significant progress. Integrating mini-grids into DisCo networks to supply power to underserved areas will also be beneficial.
To support DisCo viability and boost revenue collection, the government must update the tariff schedule to synchronize the payment expectations in the Multi-Year Tariff Order (MYTO) and the financing plans of GenCos, TCN, and DisCos. Utilizing data analysis to more effectively allocate available power, investing in new IT systems for DisCos to enable revenue collection, management, and transparency, and conducting an independent assessment of the power sector value chain to ensure accurate estimation of costs for electricity delivery and tariff adjustments will also be essential.
Finally, understanding demand to guide prioritization is critical. Studying energy demand to determine customer profiles, as well as stranded capacity in load rejection, will ensure data-driven planning and reduction in technical, commercial, and collections losses.
In conclusion, addressing Nigeria’s energy gap will require significant investment in the power sector, reforms in the gas-to-power value chain, planning for renewable energy integration, boosting revenue collection, and understanding demand to guide prioritization. These measures will help to improve the country’s power sector, and support its economic growth and development.
