Daud Olatunji
In a bid to rejuvenate Nigeria’s struggling power industry, the federal government has revealed that electricity companies in the country require an infusion of approximately N2 trillion ($2.5 billion) in new capital.
An energy adviser to President Bola Tinubu,Olu Verheijen highlighted the over-leveraged and under-capitalized state of power firms, emphasising the urgent need for new investors to breathe life into an industry struggling to meet the demands of its 200 million residents.
PLATFORM TIMES reports that the nation currently generates and supplies a modest 3,500MW to 4,500MW of power across its 36 states and the Federal Capital Territory, leaving a significant gap in meeting the growing energy needs.
In an interview with Bloomberg, Verheijen outlined the challenges faced by power companies, citing inadequate pricing, inconsistent revenue collection, and a deteriorating national grid as key obstacles.
Lagos, Nigeria’s largest city with 25 million residents, receives only 1,000MW from the grid.
In stark contrast, a city like Shanghai, with a similar population, boasts a peak demand supply exceeding 30,000MW.
Verheijen stressed the necessity of implementing policies that facilitate reorganization, recapitalization, and the inclusion of new partners with fresh capital to address these systemic issues.
President Bola Tinubu, on January 1, 2024, had pledged to enhance electricity supply in the West African nation.
The proposed recapitalization plan will be complemented by efforts to make electricity tariffs more reflective of costs, thereby enhancing the liquidity and viability of the power sector.
Although the privatisation of generation and distribution occurred in 2013, tariffs remain under the control of the Nigeria Electricity Regulatory Commission, a government-controlled body.
The existing challenge arises from restrictions on power firms’ ability to charge tariffs that cover the full cost of electricity distribution, resulting in government subsidies to the sector.
Verheijen said without a tariff review, the recent weakness in the naira and escalating inflation may elevate energy subsidies from N600 billion in 2023 to an estimated N1.6 trillion in 2024, according to the regulatory authority.
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