Nigeria’s ailing power sector was in the news in the year ended 2024 for the wrong reasons. Months after months, it’s one unpleasant news – energy theft, ageing infrastructure, liquidity challenge, agitation for cost-reflective tariffs, lack of maintenance, estimated billings, low investment in infrastructure and above all, power outages from grid collapses – that assaulted the ears of Nigerians.
It was a year stakeholders in the power value chain – operators, consumers and regulators alike – will like to quickly put behind them so that they can turn attention to the new year.
Unfortunately, despite the huge hope brought about by ongoing reforms in the power sector and assurances of a better service by operators, 2025 might not be too different from the preceding year.
While the reforms are timely, Business Hallmark findings revealed that the rot in the sector is massive and that it will take several years for it to be fixed.
2024 IN RETROSPECT
The year ended for Nigeria’s power sector on a wrong footing. Despite improved investments by both government and private investors, electricity consumers failed to get constant and reliable energy.
Activities in the sector began the year on a low note, with the regular news of protests by customers against estimated bills, energy theft, attack on workers of energy firms, non-availability of pre-paid metres, as well as the usual darkness in the land occasioned by frequent power failures.
However, the relative inactivity in the power sector changed on April 3rd 2024 when the Nigerian Electricity Regulatory Commission (NERC) approved an increase in tariffs for consumers on Band A, who enjoy electricity for 20 hours and above. Before the latest increment, electricity tariffs were last reviewed in 2020.
According to the Vice Chairman NERC, Musiliu Oseni, the increase took immediate effect. He added that the commission would categorize customers using data from electricity distribution companies (Discos).
“The commission has approved a rate review of N225 per kilowatt hour from a maximum of N68 per kilowatt hour for just under 15% of the customer population in the Nigerian electricity supply industry”, Oseni had explained.
Defending the removal, the Senior Special Adviser to the President on Media, Bayo Onanuga, said the Federal Government spent $2.6 billion, about N4.04trillion at the current exchange rate, annually on electricity subsidy.
Despite stiff opposition by affected consumers and organized labour, the government refused to bulge, saying the decision was taken to ease pressure on public finances.
While the Federal Government had been able to save over N2 trillion from the removal of subsidy on energy enjoyed by Band A customers, BH checks show that the government still subsidize electricity to the remaining 85 percent consumers, who are on Band’s B, C and D to the tune of N2.2 trillion annually.
In June 2024, President Bola Tinubu signed the 2023 Electricity bill into law. The new electricity law repealed the Electric Power Sector Reform Act (EPSRA) which was signed by former President Olusegun Obasanjo in 2005 to provide legal, regulatory and governance frameworks for the industry.
However, the new act consolidates all legislations dealing with the electricity supply industry to provide an omnibus and ideal institutional framework to guide the post-privatization phase of the Nigerian Electricity Supply Industry (NESI) and encourage private sector investments in the industry.
With the new law, states are now allowed to issue licenses to private investors who have the ability to operate mini-grids and power plants. They were also given the powers to licence and oversee the activities of distribution companies in their states.
However, despite government’s efforts at fixing the rot in the power sector in 2024, the sector still faced myriad of challenges, including frequent national grid collapses, gas shortages, high debt and vandalism.
For instance, the country’s weak national grid collapsed 12 times in 2024, with October of that year turning out to be the worst month in history for the manager of the national grid, the Transmission Company of Nigeria (TCN).
From Monday, October 14, to Saturday, October 19, 2024, the national grid collapsed three times, plunging the nation into total darkness.
The national embarrassment began to unravel on Monday, October 14, when the grid totally shut down. Efforts by TCN engineers to restore it had reached advanced stage on Tuesday, October 15th, when it suddenly tripped off for the second time in 24 hours.
After several hours of restoration efforts put in by perplexed and tired engineers, the grid was again restored in the night of Tuesday.
Many Nigerians were busy celebrating having electricity for a straight 86 hours on Saturday, October 19th, when it collapsed yet again, the third time in a week.
The October debacle further exposed the deep rot in the power sector. According to available data, the grid collapsed 105 times in the last nine and half years.
Specifically, while the grid recorded 93 shut downs during the 8-year reign of former President Muhammadu Buhari from May 2015 to May 2023, it has officially collapsed 12 times since incumbent President Bola Tinubu came to power over one and half years ago.
Also in 2024, 128 transmission towers were destroyed by vandals across the country. The obvious sabotage often contributed to the constant collapse of the national grid.
2025 OUTLOOK
While new efforts been undertaken to release the sector from its chokehold will no doubt help put it back on the path to recovery, the sector is expected to remain under pressure for a while from entrenched dynamics which will continue to stall its growth.
At the heart of the power sector’s woes lies the two weakest links in the value chain, the transmission and distribution legs.
According to a report by leading credit rating agency and provider of industry research and knowledge in Nigeria and Sub-Sahara Africa, Augusto and Co. Limited, as of December 2022, Nigeria’s peak electricity demand was 19,798 megawatts, while installed generating capacity stands at 13,014 megawatts.
Quoting the Nigerian Electricity Regulatory Commission (NERC), Augusto and Co. put the wheeling capacity of the national grid at circa 8,100 megawatts, about 5,000 megawatts short of the installed capacity of the gencos.
However, energy experts faulted the NERC data used by Augusto, arguing that the grid no longer has the capacity to wheel above 6,000 megawatts owing to weak and obsolete equipment.
TCN bottleneck
According to Engr. Dipo Iluyomade, a systems engineer and former staff of the defunct National Electricity Power Authority (NEPA), while the 23 gencos operating in the country have collectively ramped up electricity generation to over 16,384 megawatts, the capacity of the national grid has dropped to below 6,000 megawatts.
“While Nigeria currently has an installed electricity generation capacity of about 16,000 megawatts as more power plants come on stream, the highest peak generation of 8,415 megawatts was achieved in September 2023.
“Gencos cannot continue to ramp up production because the national grid can’t take it. The highest electricity wheeled by the TCN, 5,377 megawatts, was achieved on August 1, 2023. Since then, the frequency has dropped.
“Due to several constraints, the TCN currently cannot wheel more than 6,000MW of electricity generated by gencos.
“Several attempts to overload the grid in the past without commensurate investment in infrastructure had resulted in system collapse. Most grid collapses are traceable to system overload of more than 5,000 megawatts.
“Meanwhile, TCN is not the only body responsible for our power crisis. Distribution companies also have their own share of the blame.
“At their best, distribution companies can only take 5,000 megawats, that is if the TCN is able to wheel it. What they are doing now is between 3,700 megawatts to 4,300 megawatts.
“We are all aware of the constant face off between the TCN and discos over allegation of load rejections. I don’t blame the discos because they can’t take what they cannot handle.
“For the nation to enjoy stable electricity supply, the challenges faced by these two struggling links must be fully addressed”, the former NEPA official noted.
BH’s independent findings, meanwhile, revealed that the national grid, an intricate network designed to transmit electricity from power plants to distribution companies across the country, is in a very sorry state.
According to available information, power transmission started in Nigeria in the first half of 1960s when the two national hydro power stations located in Kainji and Jebba were interconnected by the National Control Center (NCC) in Osogbo, Osun State through a 330 kV transmission line.
In latter years, the 330 kV transmission network increased to twenty-eight to accommodate new power plants been built across the country.
They included the Shiroro Power Dam in Niger State, Egbin Thermal Plant in Lagos, as well as two gas fired plants, Sapele and Afam, located in Delta State.
The transmission infrastructure further increased from twenty-eight to 52 stations and sixty-four transmission lines between 1998 and 2012.
The grid interconnects these power stations through an extensive transmission lines, with four control centers (one national control center at Oshogbo and three supplementary control centers at Benin, Shiroro, and Egbin.
However, most of the equipment purchased for the plant from Japan as far back as 1963, are still in active service.
Several sources in the TCN, who spoke to our correspondent on the matter, said the existing transmission infrastructure in the country is outdated and needs total overhaul.
“The highly complex transmission system gets 330 kilovolts electricity from power plants, both hydro and gas-fired. Because the power is useless at that high frequency, TCN must first step it down to 132, 33, and 11 kilovolts before it can put it on its power lines.
“Unfortunately, most of the lines are outdated and obsolete resulting in the loss of more than 40% during transmission. In fact, some are more than 50 years old.
“For instance, the first transmission stations and lines, which were constructed in the mid 1960s are now almost 60 years old.
“Subsequent ones built in the early 80s to evacuate power from Egbin, Afam and Sapele plants are also more than 40 years old.
“While most of the equipment are no longer working, replacements have not been gotten for them. They are still in service because of the ingenuity of engineers at the TCN, who constantly cannibalize parts from unserviceable transformers to repair those still standing.
“While recent administrations have made efforts at fixing the power infrastructure crisis, the deficit is quote massive.
“It will take the nation at least 10 to 15 years of constant investment to restore the sector back to its old glory”, the engineer further added.
Discos’ weakness
Apart from low investments, another issue that will challenge the power sector in 2025 is the existing weak distribution network.
According to sources in the transmission chain, technical losses, especially weak feeder transformers and sub stations, as well as non-technical losses, namely low investments and electricity theft will frustrate government’s efforts to provide stable power supply.
Added to this challenges is gas supply shortage, which denies gencos the much needed fuel to fire their plants.
Due to shortage of gas, many power plants have remained idle for months, contributing nothing to the national grid.
Also, government and investors have largely failed to do their own part of putting the sector on sound footings through adequate funding.
While the private sector is reluctant to invest in the wobbling sector owing to government’s continued capping of tariff, the government has not been able to raise the required funds needed to transform the sector and has refused to sanction further tariffs increase for fear of social upheaval.
Multiples sources in the industry told BH that the power sector will need an annual investment of $10 billion to $12billion for 10 consecutive years to operate at peak performance, an amount the government does not have.
Speaking on the matter, Minister of Power, Adebayo Adelabu, said the major problem stalling the growth of the power sector is lack of funding.
The minister said that to revive the power sector, at least $10 billion is needed annually in the next 10 years, lamenting that the sector had been operating on a subsidized tariff regime owing to the absence of a cost-reflective tariff.
“And so we must make this sector attractive to investors and to lenders. So, for us to attract investors and investment, we must make the sector attractive, and the only way it can be made attractive is that there must be commercial pricing.
“If the value is still at N66 and the government is not paying subsidy, the investors will not come. But now that we have increased tariff for a Band, there are interest has been shown by investors”, Adedibu noted.
Speaking on the frequent grid collapses, the minister said it was inevitable owing to the obsolete equipment still used for power transmission by the TCN.
“We keep talking about grid collapse. Grid collapse, grid collapse, whether it’s a total collapse, partial collapse, or slight trip-off.
“This is almost inevitable as it is today, given the state of our power infrastructure, the infrastructure is in deplorable conditions, so why won’t you have trip-offs? Why won’t we have collapses, either total or partial?
“It will remain like this until we can overhaul the entire infrastructure. What we do now is to make sure that we manage it”, the minister stated.
Adelabu added that there is a need to have power grids in different regions or states to put an end to incessant grid collapses.
According to the minister, having multiple power grids in each region and state would ensure stability.
“The new Electricity Act has decentralized power. It has enabled all the subnational governments, the state government, and the local government, to be able to participate in the generation, transmission, and distribution of electricity.
“We all rely on a single national grid today; if there is a disturbance of the national grid, it affects all 36 states. It shouldn’t be like that.
“This (new act) will enable us to start moving gradually towards having regional groups and possibly having state grids.
“And each of these grids will be removed and shielded from each other. So, if there’s a problem with a particular grid, only the state where it belongs will be affected, not the entire nation. So, this is one of the impacts this Electricity Act will have”, he stated.
SOURCE: HallmarkNews