Nigeria’s Power Sector: Why Innovation, Not Resignation, Will Light Up Our Future

Nigeria's electricity sector is facing immense pressure in the face of rapidly growing global demand. According to the International Energy Agency, electricity consumption is expected to increase by 3.3 percent to 3.9 percent annually, driven largely by AI data centers, industrial electrification, and extreme heatwaves. As a nation with a youthful population and high ambitions, Nigeria cannot continue to struggle with unreliable power supply.

While the Nigerian government has taken significant steps to reform the electricity sector, such as the Electricity Act 2023 and efforts to decentralize the market, these reforms alone are not sufficient to overcome the challenges we face. Three major issues stand out: gas supply, transmission and infrastructure security, and liquidity problems.

First, gas supply is crucial for thermal power generation, which accounts for around 75 percent of Nigeria's electricity production. Interruptions in gas supply directly impact power generation capacity, creating a vicious cycle. Second, the transmission infrastructure is fragile and vulnerable to vandalism, causing generated electricity to often fail to reach its intended destinations.

Lastly, the Nigerian Electricity Supply Industry (NESI) suffers from severe liquidity issues due to non-cost-reflective tariffs, unpaid government subsidies, and significant technical and commercial losses. These unpaid commitments cause DisCos to collect less revenue than needed to pay for the electricity supplied, leading to market debts, insufficient investments, and a weakened investor confidence.

To address these challenges, the Federal Government must implement a Domestic Supply Obligation (DSO) dedicated to the power sector, ensuring that gas producers in Nigeria have access to the necessary gas. The government should also incentivize gas development for power generation and establish better-structured supply agreements.

Additionally, conducting an independent network or infrastructure audit to determine the capacity of existing transmission infrastructure is essential. This will help identify areas that require immediate attention and quick solutions.