If Tunji Awojide was told in 2013 that he would still need four diesel generators to run his hospitality businesses 10 years after the privatisation of Nigeria’s power sector, he would have shrugged off such a statement.
But that is the reality he is contending with as frequent power outages remain constant in Africa’s largest economy – with no city spared electricity shortages – despite billions of dollars invested in the sector.
The sector was privatised in November 2013 as the distribution and generation companies were handed over to private investors amid high expectations but the country’s national grid has only managed to record an additional 1,426 megawatts, according to findings by BusinessDay.
This development has sparked criticisms from many Nigerians who have suffered from chronic shortages of power, and repeated promises to fix the problem have long been a staple of election campaigns.
“I run a 500KVA generator virtually 24 hours, and you can imagine how a 500KVA generator gulps fuel. If I have a full house, I run an 800KVA generator. The days that we have very few guests, we run a 350KVA generator. I have four generators; does that not sound crazy to you?” Awojide said.
Awojide is one of millions of business owners in the country who are forced to depend on generators to power their businesses.
Data obtained from the Nigeria Electricity System Operator showed electricity generation increased by 41 percent from an average of 3,400MW in November 2013 to 4,826MW as at October 13, 2023.
“From gas availability, pricing, and metering to delayed payments limiting cash flow for operating and capex investment, there is a myriad of problems without the country’s economic manager being deliberate and intentional in solving them,” Jide Pratt, country manager of Trade Grid, said.
“To a large extent, Nigeria is still far away from solving its power problems,” he added.
A senior official in the power sector who pleaded anonymity said electricity subsidy has increased largely on the back of the massive devaluation and floating of the naira.
“The electricity sector is facing a liquidity challenge driven initially by the six underperforming distribution companies, which until the devaluation had been unable to meet their market obligations to the tune of about N30 billion per month,” the source said.
He noted that the latest shortfall is mainly driven by the abrupt naira devaluation causing a significant hike in the gas pricing and the price of generation contracts that are pegged to the US dollar.
“The key problem for government and the sector now is how do you pass on such a high cost of electricity to consumers that are receiving low energy since privatisation in 2013,” he added.
The country has an installed power generation capacity of 12,500MW but produces a fraction of that for its over 200 million citizens, leaving millions of households and businesses reliant on power generators.
Although there are few wins such as state electricity autonomy and growing traction in renewable energy, the country still has the lowest access to electricity globally, with about 92 million people lacking access to power, according to the Energy Progress Report 2022 released by Tracking SDG 7.
“The road ahead needs more attention than any other period which is why I question the decision of the President to place a finance expert in power at this particular time,” Pratt said.
BusinessDay analysis shows that although Nigeria’s transmission capacity has increased by 20 percent to an average of 4,200MW in the last eight years, the population has soared by 57 percent from 131 million people to 206 million, according to the latest World Bank estimates.
“Another major issue over the years has been the unavailability of gas,” Kayode Oluwadare, an energy expert, said. “Large gas-fired power plant projects require power purchase agreements and feed gas agreements before they can secure funding, but the inability of those projects to secure feed gas supply on a long-term basis is a major challenge.”
Kelvin Emmanuel, chief executive officer of Dairy Hills, said the country cannot increase electricity generation without addressing three things.
He said on social media platform X: “You cannot increase electricity generation without addressing three things: Increasing the high-pressure transmission pipes for gas from 2,000 km to 7,000 km; declaring a state of emergency on prepaid meter adoption to raise it from 5.6 million to 12 million users, as a means to reduce impairment in revenue collections; and investing in transmission infrastructure to ensure the load delivered to Transmission Company of Nigeria is fully offtaken by the DisCos [distribution companies].
“This is why you need a strategy and implementation retreat between ministers of petroleum, gas resources, and power to ensure the KPIs are met.”
Data from the Nigerian Electricity Regulatory Commission (NERC) showed the aggregate technical, commercial, and collection losses for all the DisCos stood at 45.46 percent. were still substantially greater than the expected industry average of 21.75 percent in 2022.
“The inability of the DisCos to meet their allowed loss targets means they are unable to meet revenue requirements, thereby compromising their long-term financial position,” NERC said in its latest report.
One senior analyst told BusinessDay that “with the mounting debt and the record-breaking unfunded shortfall, it is only a matter of time before the market grinds to a complete halt. And that will be devastating.”
While Nigeria seems to be moving at a snail’s pace, the stories for other African countries seem different.
For instance, Ghana is making plans and implementing policies and programmes to further grow its power sector to achieve 100 percent universal energy access and probably export to Nigeria.
“Ghana has through a robust policy formulation and implementation achieved between 80 to 85 percent universal energy access in the country,” Hanson Monney, head of generation and transmission unit, Ministry of Energy, Ghana, said at an industry event last September.
In Ghana, according to Monney, the government was exploring all options including grid energy, mini-grid and solar-dominated renewable energy to achieve the country’s universal access to energy by 2024.
“So, we are working on all these things to make sure that the power system of Ghana continues to be as good as it is or even better, and then, maybe, we can be exporting more to our big brothers in Nigeria when the grid is finally settled,” Monney said.
Apart from Ghana, Kenya is also one of the countries that boast constant and stable power supply both in the rural and urban parts of the East African country.
“Kenya’s energy mix includes hydropower, geothermal energy, wind power, solar power, and biomass. With the bulk of electricity coming from renewable resources, Kenya ranks as a regional leader in renewable energy,” Energy Capital & Power, an intelligence publication, said.
“Over 80 percent of Kenya’s electricity is generated from renewable energy sources; the country has 62.7 percent electricity access for rural areas and 94 percent for urban areas,” it added.
Tunisia also boasts 100 percent national electricity access for both rural and urban areas.
The North African country predominantly generates its electricity from natural gas and is on track for long-term investment in renewable energy, targeting a 30 percent share of renewables by 2023, according to findings by BusinessDay.
Algeria has a 99.8 percent national electricity access rate – 99.6 percent in rural areas and 99.9 percent in urban areas.
“Natural gas accounts for 96 percent of the country’s installed capacity with the remaining 4 percent sourced from a combination of oil, solar, hydropower, and wind,” Energy Capital & Power said.