Onome Amuge
Nigeria, Africa’s most populous nation, was plunged into darkness on Tuesday, January 27, after its national electricity grid collapsed for the second time in less than a week. The blackout, affecting major cities including Lagos, Abuja, Port Harcourt, and Kano, revived urgent questions about the structural fragility of the country’s power sector and the financial frameworks supporting it.
This latest outage comes just four days after a previous collapse on January 23, signaling a troubling continuation of reliability problems that have plagued Nigeria’s electricity infrastructure for decades. In 2024 alone, the national grid failed nine times, interrupting industrial output, disrupting healthcare delivery, and limiting daily life for more than 200 million Nigerians, most of whom already contend with poor access to electricity.
According to industry reports, Nigeria generates only a fraction of the electricity needed to meet domestic and commercial demand. At its peak, total generation hovers between 4,000 and 5,000 megawatts, far below the estimated 30,000 megawatts required for the country’s economy and population. The persistent shortfall forces businesses and wealthier households to rely heavily on diesel and petrol generators, significantly increasing operational costs and contributing to environmental pollution.
Industrial economists warn that the lack of reliable power is a major drag on economic growth. Manufacturing firms face intermittent production halts, commercial enterprises incur additional energy costs, and foreign investors often cite power instability as a key risk in investment appraisals.
Dan Kunle, an energy sector expert, argues that the roots of the crisis are structural rather than purely technical. Speaking in a recent television interview, Kunle traced the sector’s dysfunction to a combination of underinvestment, politicised privatisation, and insufficient leadership.
“The privatization of the Power Holding Company of Nigeria (PHCN) was mishandled. It was over-politicized, and successive administrations have failed to implement reforms consistently,” Kunle said. He highlighted the fragmentation of the sector into multiple generation and distribution companies as a turning point that failed to yield its intended modernisation benefits.
Kunle emphasised that the real bottleneck lies not in electricity generation but in transmission. According to him, while power plants can be expanded, the infrastructure needed to transport electricity across vast distances,including high-voltage transmission lines, transformers, and substations,requires massive capital investment and sophisticated operational oversight.
“Generation is straightforward; transmission is the most expensive and technically complex part,” he said. Citing Lagos as an example, Kunle noted that private industries and commercial entities collectively generate roughly 7,500 megawatts daily. “If these capacities were consolidated and efficiently transmitted, Lagos’s industrial and commercial output could easily double,” he added.
To address the financing gap, Kunle suggested encouraging electricity companies to list on the stock market. He added that publicly traded power companies could attract private capital, enhance transparency, and create incentives for efficiency, drawing on models successfully implemented in the United States and other markets.
Meanwhile, amid repeated blackouts, the federal government announced a major financial intervention. The inaugural tranche of the N501 billion Presidential Power Sector Debt Reduction Programme (PPSDRP) achieved full subscription, showcasing investor confidence in the government’s attempt to address historic arrears in the sector.
According to a statement from Olu Verheijen, the special adviser to the president on energy, the bond issuance attracted pension funds, banks, asset managers, and other investors. The programme seeks to restore liquidity to the power sector, resolve legacy payment obligations to generation companies, and underpin structural reforms intended to create a financially sustainable electricity market.
“The Programme represents a decisive reset of the electricity market, combining debt resolution with broader financial and structural reforms,” Verheijen said at the signing ceremony in Lagos.
The Series 1 bond issuance, executed by NBET Finance Company Plc, raised N300 billion from the capital market and allocated an additional N201 billion directly to power generation companies. Under the programme, verified receivables for electricity supplied between February 2015 and March 2025 are being settled through negotiated agreements with five generation companies including First Independent Power Limited, Geregu Power Plc, Ibom Power Company Limited, Mabon Limited, and Niger Delta Power Holding Company Limited.
The total negotiated settlement amount for these companies is N827.16 billion, to be paid in four phased instalments, with the proceeds from the Series 1 issuance funding the first and second instalments, totaling N421.42 billion, about 50 per cent of the total obligation.
Industry stakeholders welcomed the move. Kola Adesina,Sahara Power Group’s managing director, described the debt resolution as critical for restoring investor confidence. “Capital formation can only happen when there is a clear line of sight to recover investments previously made,” he said, adding that construction on the second phase of Egbin Power Plant would commence immediately following settlement of arrears.
Embedded generation: Aba Power offers a blueprint
While the national grid failed, Aba Power, one of Nigeria’s newest distribution companies, successfully resumed electricity supply to its customers after a brief disruption in gas supply to its embedded generation plant, the 188MW Geometric Power Aba Ltd.
According to a statement, the outage, which began at 2 pm on Monday, January 26, was resolved swiftly by the gas supplier, Heirs Energies, allowing electricity to be restored to nine of Aba Power’s 17 local government areas. The company sourced additional power from the national grid to mitigate the impact on industrial customers during the disruption.
Cliff Eneh, a former senior manager with the defunct NEPA and a former Texas Power and Light executive, highlighted Aba Power’s performance as evidence of the advantages of distributed or embedded generation models. “Aba is the only place in Nigeria currently enjoying power supply. This demonstrates the resilience that embedded systems provide,” he said.
Eneh noted that embedded generation allows for operational autonomy and responsiveness, qualities that centralized grids, dependent on aging transmission networks, struggle to achieve. He warned that cities reliant on the national grid, including Lagos, Abuja, and Port Harcourt, remain highly vulnerable to outages, indicating the urgent need for diversified electricity supply strategies.
The twin challenges of grid instability and underinvestment impose severe costs on Nigeria’s economy. Industrial output suffers, operating expenses rise, and foreign investors are wary of committing capital. The widespread use of diesel and petrol generators further exacerbates pollution and carbon emissions.
Analysts argue that meaningful reform requires a combination of financial innovation, technical expertise, and strategic policy shifts. They further argue that financially, debt resolution programmes like PPSDRP can restore liquidity, incentivise reinvestment, and reduce arrears. Technically, investment in transmission infrastructure is considered critical to move electricity from high-capacity generation hubs to demand centres efficiently. Strategically, embedded generation models offer a flexible and resilient alternative, particularly for industrial clusters and commercial hubs.
Kunle stressed the broader opportunity costs: “Nigeria has the generation capacity to thrive. The question is whether the country can finally build the infrastructure and institutions needed to deliver it. Until then, power will remain a constraint on growth and prosperity,” he noted.
The government’s challenge, analysts say, is to balance debt resolution, infrastructure investment, and regulatory oversight with a clear strategy for transmission expansion and sector efficiency. They added that without such a framework, recurring grid failures are likely, and the economy’s dependence on self-generated power will persist.
