In Search of Solutions to Nigeria’s Power Challenges
(All references are below the article)
No sooner had Peter Obi, the presidential aspirant of the Labour Party, made a tweet about his journey to Egypt to understudy, among others, the Egyptian Power Sector than reactions poured in (1). While some hailed it as a welcome development, others posited that it is misplaced and ill-timed. While complaints trail the epileptic power supply in the country, many do not understand the fundamental issues and how much of a front-burner the issue of resolving this embarrassing problem should be.
Interestingly, just a few hours earlier, the electricity distribution companies sent formal notices to their customers informing them of a “…systemic collapse of the national grid causing the outage currently being experienced.”. While that made it the 5th major time the grid collapsed this year (3), it is the 17th time it is collapsing if you count those that were not made public because they lasted for a short period (4). That the latest happened on Democracy Day is instructive.
In a piece I wrote in December 2019 titled ‘Let There Be Darkness’ (5), I analyzed how Nigeria’s power challenges are policy-made and without a holistic approach to resolving them from the roots, we would only be recycling the old ineffective solutions. With elections coming up in a few months, we must understand the gravity of the issues, know the problem spots, craft questions around them, and ensure that we accept only realistic attempts at solving them.
With the aspirants talking about 12% annual GDP growth (6), without resolving our power problems it would be impossible. Power is needed to power manufacturing. It is needed in the agricultural value chain. It is even a key component of the technological revolution. So, let’s start with the obvious question of how electricity is generated.
A Sector Seeking a Savior
Having electricity to power your home has three major components — generation, transmission, and distribution.
Generation is done by generation companies (GenCos), which are private companies. Gas accounts for 80% of Nigeria’s grid electricity, while hydroelectricity accounts for 20%. GenCos say they have invested in power plants that can produce over 13,000 MW of electricity. But there is a difference between what you can do and what do, right? The GenCos only generate 7,600 MW out of the 13,000MW they are capable of (7).
Why is this?
That’s where the second component of how you get electricity in your home comes in — Transmission. The Transmission Company of Nigeria (TCN), a federal government agency, boasts of having only 8,100 MW capacity ( 8 ). This means that TCN would only be able to transmit at most 8,100 MW to Nigerians even if the generation companies can produce the full 13,000 MW of electricity. And you see that 8,100 MW, Nigerians don’t get it. That’s because at least 7% of all power that is transmitted to the national grid is lost due to poor infrastructure and maintenance by the federal government (9). These are called technical losses. The largest capacity ever transmitted in Nigeria was in March 2021 and it was 5,800 MW (10). The average power transmitted is 4,500MW.
Why is this average so?
Apart from poor infrastructure and maintenance, another reason is that the privatized GenCos have never generated up to 7,600 MW. They often complain of gas shortages (11). This is strange considering Nigeria holds the largest natural gas reserves in Africa — and the ninth-largest globally (12).
Now comes Distribution.
The third component is the distribution. These are done by distribution companies (DisCos), also private companies. 11 companies spread across the company control how much energy you get. These companies are the collection companies. They send you electricity, collect the money, and then remit the funds to GenCos and TCN after they have taken their share of the revenue. One of the challenges bedevilling the industry is how to collect the payment. There are a lot of commercial losses because only 40% of Nigerians have electricity meters (13). Worse, 47% of all installed prepaid meters are bypassed by consumers (14). Energy theft is rampant with customers tampering with their meters to stop them from reading their electricity usage. Whatever revenue is generated in the energy sector is gotten from only 25% of energy users.
The Issue of Crazy Bills
While writing this section, someone chatted me up about the crazy bill his DisCo brought. Here is why that happens: GenCos and TCN have given a certain amount of energy to the DisCos. They expect to get paid. The DisCos get paid from only 25% of the energy users. But there is still a definite amount of energy used for which they cannot account for because of tampered meters and customers who are not even registered on the grid. So they do the next best thing — calculate how much they should get from the energy used and remove the revenue they got from the paying customers. The remaining balance is shared among registered users who do not have meters.
That’s why you get crazy meters even though a senior official at one of the DisCos told me only 50% of the remaining balance is sent to those without meters.
But you know what? Even the crazy bills are not paid. Suppose a DisCo brings N10,000 as your energy bill for the month, you pay N2,000 and you are left alone with a stern warning that you would be disconnected from the grid if you don’t pay up. You don’t pay your N8,000 debt, and then only pay N3,000 the next month when a bill of N17,000 arrives. On and on. The DisCos are no fools because they know that if they disconnect your power supply, you could connect illegally like a lot of others. By disconnecting your line, you would be using free energy they would have to pay the GenCos for. So they take your new N3,000 knowing that getting N5,000 out of N27,000 is better than getting nothing at all. The most performing DisCo in Nigeria (Abuja) has a revenue collection efficiency of 80% (15). Port Harcourt DisCo has a collection efficiency of 43%.
Those with the meters can be adjudged winners in this Ponzi scheme because their electricity is subsidized. Nigeria has one of the cheapest electricity tariffs in Africa (16). It is cheaper than in Togo or Chad or even Gambia. The Federal Government paid a subsidy of N1.0 trillion on electricity tariffs between 2019 and 2021 (17). This is more than was spent on capital expenditure in the education, housing, water, agriculture and health sectors. While NERC said in March that the subsidy has been removed (18), there are concerns that it is only a price hike like has been observed with the fuel subsidy.
DisCos also have the federal and state governments to deal with for the payment of their electricity bills. Every month, the ministries, departments and agencies (MDAs) of states and federal governments together owe the DisCos N5bn (19). As of July 2021, they owe the DisCos at least N202 billion (20).
With this system, there is no way Nigeria would have stable electricity.
It’s a vicious cycle. The DisCos don’t generate enough revenue to procure meters to give out to customers as well as hire staff to monitor the metering system, so they don’t make more money. Because they don’t make enough money, the Nigerian Bulk Electricity Trading (NBET), the federal government agency in charge of electricity supply administration, says the DisCos owe the sum of N2.7 trillion (21). The GenCos also say that NBET owes it N1.64trillion for unutilised capacity (22). Gas producers say GenCos owe them a total of N1.3tn for the supply of the fuel to power stations (23).
A House of Darkness
All these problems lead to Nigeria hosting the largest population living with no electricity access in the world. About 50% of Nigerians, 96 million, lack access to power (24). Out of the remaining 50% with access, only 25% of them are in the rural areas, according to the World Bank-sponsored Energy Progress Report of 2022 (25). This report shows that the access rate increased by an annual average of just 0.7% (4 million people) as against the population growth rate of 2.5% (14 million). All these despite Nigeria being one of the top three recipients of international public financing available for energy projects in the world. All these despite the Nigerian government spending N11 trillion on the sector since 1999 (26). In 2019, the Vice President said his government spent N1.5 trillion on the power sector in two years (27). The Central Bank of Nigeria (CBN) has provided N1.5 trillion in interventions and loans in the last 5 years to the sector.
To invest this much in the industry and be rewarded with a worsening electricity supply is disheartening. From calculations, while 7,600 MW is the available capacity of the GenCos, Nigeria needs at least 200,000 MW to service its 200 million population. South Africa generates 58,000MW for its 59 million population.
The problems in this sector are glaring. The solutions are begging to be implemented. From fixing the commercial side to decentralizing the national grid, to getting more power plants built, to taking advantage of our natural gas supply. Therefore, beyond the rhetoric, those vying to take over the helms of power come 2023 need to clearly articulate what plans they have for stable electricity supply in the country.