Nigeria’s power sector: The way forward (part one)

This is the 22nd article I am writing on the Nigerian power sector this year and the first of a number of concluding articles I wish to write on this strategic sector or the Nigerian economy. Our aspiration to turn the Nigerian economy around and achieve a US$1 trillion economy on or before 2030 or even 2035 will remain a pipe dream unless there is a far-reaching or comprehensive strategic repositioning of the power sector as a key driver of our aspiration for fast-paced, inclusive and transformational economic growth and development.

Nations that have recorded a high rate of economic growth recently did so, among other things, by investing heavily in their power sector. A good example is China. In 2000, China’s power generation was 200,000 megawatts (MW) or 200 gigawatts (GW). By 2020, it has increased astronomically to 2,201 GW, a ten-fold (1000 per cent) increase. By 2025, it has further increased to 3,610 GW, a 64 per cent increase within five years. In the same period, China’s gross domestic product (GDP) increased from US$1.211 trillion in 2000 to US$14.69 trillion in 2020 (a 1013 per cent increase) and to US$19.03 trillion in 2025, a thirty per cent increase in five years. In contrast with our anaemic power supply, among other factors, Nigeria’s GDP crashed from US$510 billion in 2014 to US$188.64 in 2025. (IMF figures in all estimates) Noted, however, arethe factors responsible for the crash in our GDP that go beyond power supply. Exchange rate devaluation is a key factor, but the factor of poor power supply is key also. Compare the rate of increase in China’s power supply and GDP between 2000 and 2020. They both tally at 1,000 per cent and 1,130 per cent increases. The breathtaking pace of growth in China’s power supply and GDP is not accidental. It is the result of medium- to long-term planning, enormous capital investment and dedicated commitment to implementation.

Read also: The failure of the Nigerian power sector and implications for the economy

The Tinubu administration has generated a raft of policy instruments to turn around the power sector. These include principally the 2023 Electricity Act, which has, among other things, opened up the Nigerian electricity market to regulation by sub-nationals of electricity markets in their domains; the promotion of renewable energy as well as the issuance of licences to bulk electricity consumers for captive power plants, among other reforms; the National Integrated Electricity Plan (NIEP 2025), a revised and comprehensive policy framework designed for the next decade or so; and the Nigeria Integrated Resource Plan (NIRP 2024), which is the technical component of the NIEP 2025. As laudable as the intentions behind these power sector policy instruments are, they are characterised by two major factors. First are unrealistic power sector targets. Nigeria’s energy target, for example, aims to achieve universal electricity access (connection of all Nigerians to electricity) by 2030, which all discerning observers know is unrealistic in a country with a deficit of 100 million people, the largest globally. The Transmission Company of Nigeria has a plan to transmit 20,000 MW of power through its grid by 2025, but by March 2, 2025, it has only been able to achieve 6003 MW. Nigeria estimates it needs US$262 billion in investment in the power sector by 2030 to achieve 30,000 MW, with a renewable component of 9,000 MW, but the average private sector investment in the power sector in 2024 does not seem to amount to more than $2 billion at the very most. Of the US$6.7 billion invested in the Nigerian energy sector in 2024, US$5 billion was accounted for by the oil and gas sector. So, where is the quantum of US 262 billion going to come from by 2030? Second is the silo mentality of public sector economic planners and managers. This is not peculiar to the power sector. It took the United Kingdom Nigerian Infrastructure Advisory Facility (UKNIAF) tremendous effort to bring different public sector institutions/stakeholders together to share data and adopt a common vision in the preparation of the Nigeria Integrated Resource Plan. The major culprit for the silo mentality is the absence of an operational National Development Plan, where all public sector economic planners and managers can see the big picture and connect the dots. This vacuum is responsible for power sector planners not being able to strategically position the power sector as the Chinese have done in driving fast-paced economic growth.

 “But Nigeria needs to quickly exploit the gradually closing window of opportunity for fossil fuel, specifically gas-fired thermal plant investment financing, for a resource, gas, which we have in abundance.”

Assigning a critical strategic role to the power sector in Nigeria’s economic transformation has become an imperative. But first, the power sector has to be transformed. That transformation requires structural, institutional, ownership and governance reforms that will put the private sector in the driver’s seat and engineer a deluge of private sector investments within a relatively short time that could lead to a quantum leap in fossil fuel power generation, transmission, and distribution, which is where the financing gap and other constraints are right now. Renewable energy adoption seems to have caught on very fast with or without government incentives. But Nigeria needs to quickly exploit the gradually closing window of opportunity for fossil fuel, specifically gas-fired thermal plant investment financing, for a resource, gas, which we have in abundance.

From a global strategic perspective, Nigeria is playing in the same market as China and other fast-developing economies, especially newly industrialising countries (NICs) of China, India, Indonesia, Malaysia, Vietnam, Brazil and Mexico, to mention a few. The ability of China to add an additional 3,410 GW to its power supply in 25 years and increase its GDP by US$18 trillion in the same period to become the second-largest economy in the world should be a great challenge to us as a nation.

Finally, Nigeria, as the third largest manufacturing economy in Africa, combined with its geographical advantage, has all it takes to become the manufacturing hub for West and Central Africa in the next five years and a newly industrialising country in the next ten years, provided we can reconfigure and reposition the power sector as a great enabler for a realisable industrialisation ambition.

Read also: TCN launch Committee to drive Power sector performance improvement plan

In conclusion, to strategically reposition the power sector to achieve Nigeria’s economic ambitions of a trillion-dollar economy, a leading African manufacturing powerhouse taking full advantage of the African Continental Free Trade Area (AfCFTA) and a newly industrialising country (NIC), Nigeria needs a central intelligence unit in the form of a powerful economic team coordinated by the Minister of Finance and Coordinating Minister of the Economy. The current political configuration and economic management orientation of the Federal Executive Council do not seem to allow the Minister of Finance to function effectively as the Coordination Minister of the Economy, where all key economy line ministers and technocrats are able to meet weekly to agree on and fashion best practice economic policies and models that can best drive the fast-paced transformation of the Nigerian economy. The most strategic and most powerful resource for sound and accelerated economic management is a market-facing economic policy framework. And it is free. Much has been done, but much more needs to be done. Nigeria needs a bold, common-sense power sector transformation policy framework, driven by an empowered private sector working with the government in a strategic partnership that benefits the Nigerian economy and its people.

Mr Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos.