The Economist: Nigeria Must Fix Power Sector to Realise African Leadership Role

*Says few Nigerians to bear cost of grid upgrade as firms, others exit

E mmanuel Addeh in Abuja

The Economist, a British weekly magazine, has stated that Nigeria cannot truly claim to be Africa’s economic powerhouse until it fixes its electricity supply challenges.
In an article on the state of power supply in Nigeria, the 181-year-old newspaper noted that roaring generators now literally provided the soundtrack to urban Nigerian life, producing more than twice as much power as Nigerians got from the national grid.

According to the globally renowned news medium, decades of underinvestment in Nigeria’s power supply meant it had not kept pace with the country’s growth, with more than 90 million of its 230 million people living without access to electricity.
It blamed this on what it termed deep dysfunction in the sector and a gaping lack of funds, saying that things were unlikely to improve soon, despite the pledges by the federal government to raise supply.

“As costs go up and service fails to improve or deteriorates, opting out entirely becomes ever more attractive. The government’s response looks muddled: it wants to integrate more solar power into the grid, but is also mulling banning the import of solar panels.

“If the electricity problem is not fixed, the economy will also continue to operate below capacity. Nigeria cannot be Africa’s economic powerhouse until it can power its houses,” the magazine argued.
Describing Nigerians as uniquely deprived, it reiterated that just under half the country were not connected to the national grid, which it said had never carried more than 6 gigawatts (GW).
In comparison, the article noted that South Africa, which had suffered blackouts and load-shedding still managed 48GW of grid power for its 63 million people, while Bangladesh, poorer than Nigeria and home to about 170 million people in an area a sixth of Nigeria’s size, generated around 16GW.

“In Nigeria, when production reached a high of more than 5GW one day in March, the surge made the grid collapse. The lack of grid power is a massive drag on the economy and Nigerians’ quality of life.
“Frequent power cuts in hospitals cost lives. Air-conditioning is a luxury. Tech entrepreneurs are forced to build their own power plants to run their data centres. More than half the country’s manufacturers no longer even bother to try to connect to the grid, according to the power minister.

“In 2023, Nigerians spent N16.5 trillion ($10.3 billion) on generating off-grid power, equivalent to 60 per cent of the entire government budget for the following year. That brings total supply to some 20GW, a quarter of the country’s estimated power needs.
 “Decades of underinvestment have kiboshed the system in so many different places that it is fiendishly hard to fix. The grid, still run by the government, is dilapidated and prone to collapse,” it added.
 The article stated that this limited the amount of power distribution companies would agree to buy from generating companies, which in turn, had problems beyond the lack of demand from the grid.

 Gas plants, which produced most grid power, according to the piece, were badly maintained and often failed to pay their suppliers, while gas prices were capped, implying that it could be cheaper for suppliers to burn off gas rather than ship it to plants that would pay them very little or nothing.
The paper pointed out that the distribution companies, 60 per cent of which were privatised, struggled to cover their costs as people often failed to settle their bills.

 “The government is the worst offender. Last year the distribution company in Abuja, the capital, threatened to disconnect the presidential villa and 86 government agencies over N47.2 billion  ($29 million) of unpaid bills.

“Government initiatives have not got off the ground. A partnership between Nigeria, Germany and Siemens, a German firm, is supposed to add 12GW to the grid’s ability to handle throughput. But the project has completed only a pilot phase since it was signed in 2019.

“Privatisation, which helped improve telecoms and banking in the 1990s, has failed to revamp the power sector. More than half the distribution companies that were privatised in 2011 have gone bust, dampening investor appetite,” The Economist stated.

Even after prices quadrupled for the richest households last year, today, it emphasised that payments cover only around 65 per cent of the cost of providing power, with most progress being made off the grid.

However, it highlighted that concessional financing has helped build off-grid solar projects, such as a 12MW solar hybrid plant powering a university in Maiduguri, while in March a group of organisations, including Nigeria’s sovereign-wealth fund launched a $500 million fund for bigger renewable-energy projects.

“Such projects alone will not cover Nigeria’s massive electricity shortfall, so fixing the grid is still vital. Yet successful off-grid options may make it harder.

“As reliable solar alternatives or private power plants become more widespread, as in South Africa and Pakistan, the cost of maintaining and upgrading the grid will be shouldered by fewer people,” The Economist maintained.