By Olawale Olapegba
The Nigerian electricity supply industry (NESI) has been plagued by inefficiencies and instability since privatisation 15 years ago. Frequent power outages, inadequate service delivery, and biased subsidy structures have become the norm. However, amidst this chaos, a new wave of innovation is emerging, driven by private-sector-led business models and technologies.
As Ilya Prigogine, Nobel laureate in Chemistry, once said, “When a complex system is far from equilibrium, small islands of coherence in a sea of chaos have the capacity to shift the entire system to a higher order.” In Nigeria’s electricity market, these islands of coherence are taking shape through innovative business models, such as power-as-a-service (PaaS), and technologies, such as interconnected mini-grids. Private sector players are leveraging renewable energy, energy efficiency, and digital solutions to build scalable, resilient energy assets.
Emerging players and technologies are challenging the traditional monopoly of Distribution Companies (DisCos). The future of Nigeria’s electricity market belongs to those who adapt to this new landscape. DisCos that prioritise business development, partnerships, and innovation will thrive, while those that fail to evolve risk being routed around.
Franchising is a promising business model for improving energy access and reducing losses in Nigeria’s electricity sector. By conceding operational rights to franchisees under contractual agreements, DisCos can leverage community-led management and investment to drive growth and efficiency. In June 2020, the Nigerian Electricity Regulatory Commission released the Guidelines for Distribution Franchising in the NESI. In this model, the franchisee takes over the operation of a designated network area (usually customers supplied from a particular distribution source), assuming responsibility for energy distribution, revenue collection, and customer service.
The franchisee’s business equity can come from diverse sources, including community-driven investors, CSR endowments, impact investment, and technical partnerships with EPC companies. This approach not only brings in much-needed capital but also ensures that local communities have a stake in the business, promoting ownership and accountability. Under this model, the franchisee pays a concession fee to the DisCo, which can be linked to performance metrics such as energy sales or revenue collection. The franchisee is responsible for investing in infrastructure, managing operations, and improving efficiency. In return, they earn a share of the revenue generated from energy sales.
Technical fundamentals are conspiring in favour of microgrids, virtual power plants, batteries and other distributed technologies, supporting franchising. The grid has got some big problems; distributed energy is the quickest answer. This could lead to shifts in business relationships, particularly among utilities, customers, and independent distributed energy providers. It’s not just that power demand is growing; there is also a newly aware and unhappy utility customer and a technological trend toward decentralisation.
With the right platform, clear value levers, and strong sponsors, capital is willing to back scale. The Nigerian electricity market is poised for transformation, driven by emerging business models and technologies. This business model offers several benefits, including,
- Reduced energy losses through community-led monitoring and management
- Improved revenue collection and reduced theft
- Enhanced customer satisfaction and engagement
- Increased investment in local infrastructure
- Job creation and economic growth in local communities.
To support this model, regulators can offer incentives to franchisees, such as tax breaks, grants, or low-interest loans. They can also establish frameworks for the integration of Distributed Energy Resources (DERs), including grid connection and compensation mechanisms.
The Nigerian electricity sector has significant opportunities for growth and development through franchising. By adopting this business model, DisCos can improve energy access, reduce ATC&C losses, and drive economic development in Nigeria. With the right approach, franchising can be a win-win for all stakeholders, including Discos, franchisees, customers, and local communities.
In this model, the franchisee’s goal is to optimise energy sales and revenue collection, while also improving customer satisfaction and reducing costs. The DisCo benefits from reduced operational responsibilities and enhanced performance metrics, while the community benefits from improved energy access and economic growth. This collaborative approach can help Nigeria achieve its energy goals and drive sustainable development.
The traditional excuses for underserving customers are gradually becoming invalid. The industry must adopt a collaborative franchising model to reduce Aggregate Technical, Commercial, and Collection (ATC&C) losses and improve operational efficiency. The next five years will be critical for DisCos and emerging players. Those who prioritise innovation, partnerships, and disciplined execution will thrive in this evolving landscape. The era of energy injustice and instability is giving way to a new wave of contestability and innovation. Nigeria’s electricity market is on the cusp of a revolution, and the bold will reap the rewards.
The future is bright for Nigeria’s electricity market, but only for those who dare to disrupt and innovate.
Olawale Olapegba is a seasoned professional in the energy sector committed to structuring highly bankable clean energy investments, leveraging global clean energy financing and local capital market funding solutions for project development, execution and operationalisation.