- Nigerian billionaire Tony Elumelu emphasizes the critical need for a rapid overhaul of the power industry, citing its pivotal role in revitalizing the nation’s struggling economy.
- Nigeria faces worsening power supply issues due to natural gas delivery challenges, financial instability, infrastructural deficits, and DisCos refusing to distribute electricity from TCN; Minister Adebayo Adelabu pushes for GENCO performance improvement, surpassing 4000MW, but specific DisCos struggle to disseminate power.
Nigerian billionaire Tony Elumelu, known for his significant influence in the nation’s business sector, particularly in electricity generation, has emphasized the urgent need for the government to overhaul the power industry. Bloomberg reports that Elumelu has highlighted the power sector’s critical role in revitalizing the struggling economy.
Elumelu, the owner of various companies, including Transcorp Power Ltd., recently valued at $1.2 billion, has pointed out major obstacles hindering progress in Nigeria’s electricity sector. He identified issues such as inadequate transmission infrastructure and a lack of financial stability within the electricity market as key challenges impeding growth.
The deficiency in power supply has created a domino effect, severely impacting Nigeria’s economy and contributing to the depreciation of the national currency, which has seen a significant 70% decline since June 2023. Elumelu’s concerns underscore the necessity for comprehensive reforms to address these systemic issues and foster sustainable economic development.
The status quo
Nigeria’s power supply has deteriorated for several reasons, including natural gas delivery constraints due to illiquidity issues and infrastructural deficits, as well as some distribution companies (DisCos) refusing to supply electricity transmitted by the Transmission Company of Nigeria (TCN).
Meanwhile, Nigeria’s Minister of Power, Adebayo Adelabu, on Wednesday, March 6, released a statement saying that the Power Ministry has been actively pressuring Generating Companies (GENCOs) to enhance their performance, leading to a recent boost in generation exceeding 4000 megawatts (MW). Despite this positive development, specific distribution companies are falling short of effectively disseminating the power provided by TCN.
Furthermore, power infrastructure vandalism aggravates the issue in areas like Abuja, Benin, Port Harcourt, and Ibadan. Adelabu also said he wants to enforce accountability for their performance among all DisCos.
He made it clear that deliberate underperformance will not be tolerated, and stringent consequences, including license revocation, may be enforced. Additionally, the Minister said he has directed TCN to prioritize repairing damaged transmission towers and power lines to enhance the power supply in affected regions.
My recent supervisory visits to power-generating plants have allowed me to witness firsthand the challenges confronted by the sector. Initiatives are in progress to settle outstanding debts owed to power generation and gas supply companies, ultimately alleviating financial strain and contributing to enhanced generation levels nationwide.
In a March 2024 press release, the International Monetary Fund (IMF) stated that during its 2024 Article IV Consultations visit to Nigeria, it became evident that capping fuel pump prices and electricity tariffs below cost recovery could have a fiscal cost of up to 3 per cent of GDP in 2024.
The IMF wrote, “The recently approved targeted social safety net program that will provide cash transfers to vulnerable households needs to be fully implemented before the government can address costly, implicit fuel and electricity subsidies in a manner that will ensure low-income households are protected.”