Nearly 13 years after the generation and distribution segments of the Nigerian power sector were privatised, Nigerians have declared the exercise unfruitful.
For the commercial nerve center of the country, Lagos, it has been reported that electricity costs for households and businesses has continued to rise sharply.
The Lagos Economic Development Update (2025), released by the Ministry of Economic Planning and Budget, revealed that more than 80 per cent of Lagos residents and businesses rely on off-grid electricity sources, spending about N5.3tn annually to power generators.
With a population of over 23 million, Lagos requires approximately 9,000 megawatts (MW) of electricity to meet demand.
However, supply from the national grid averages only about 1,000 MW, accounting for just 11 per cent of the state’s electricity needs.
Country-wide power generation has not exceeded 5,000MW, showing continuous stagnation of the sector in the last one decade.
This wide supply gap has forced residents and businesses to rely heavily on petrol, diesel and fuel oil-powered generators, which collectively generate an estimated 15,000 MW daily across the state. However, power from these off-grid sources comes at a significantly higher cost, averaging N130 per kilowatt-hour (kWh) compared to about N50/kWh from the national grid.
The above situation as provided by the budget ministry in Lagos affirms concerns by strategic sectors of the economy that have been affected by the power sector’s failure.
The privatisation and commercialisation of the power sector in Nigeria was carried out from the 90s following government divestment from owing public corporations to enhance the efficiency and service delivery of most public corporations in the country such as the Power Holden company of Nigeria (PHCN) formerly National Electric power Authority (NEPA) and other public corporations that have became drain pipe on scarce government resources.
The idea of privatisation is therefore the outcome of effort by liberal to emphasise the virtues of private initiatives and the superiority of its management principle.
Nigeria has privatised the power sector with the hope of improving supply of electricity to Nigerians, however privatisation have produced little results with about 60million Nigerians spending N1.6 billion on generators annually, the granting of licenses to independent power producers (IPP), the unbundling of state owned power entity into generation, transmission and distribution companies to create a competitive market for electricity in Nigeria has not helped matters as the process contradicted the transparency required.
The critics of the privatisation argued that it only succeeded in entrusting the collective wealth of the people in the hands of a few elites who used their resources to acquire these power companies.
Lack of sufficient electricity remains one of the major impediments to Nigeria quest to become one of the largest economy in the world by 2030. Nigeria energy needs is put at 160,000MW for a population of about 200 million people, infact the government target of 40MW by 2020 was not met as it was only able to generate a paltry 3.6MW , transmission capacity of 5.8 MVA, distribution capacity of 8.4 MVA and tariff collection of 70 per cent.
Mashood Sanusi Yusuf, an energy specialist, lawyer and former assistant general manager, Regulatory Compliance, Jos Electricity, told our correspondent that the privatisation exercise was a borrowed initiative from India with out any further review to embed the peculiarities of our local environment and situation to make it work.
Yusuf, said that Aggregate Technical, Commercial, and Collection (ATC&C) losses, is a major set back in Nigeria’s electricity supply chain and which the privatisation exercise was expected to deal with.
He said return on investment in the sector spans between 10 to 20 years and any investment entity would consider projected timeline of recovery.
According to him, the 2023 Electricity Act is just an ambitious piece of legislation which has further compounded the near failed exercise by officially enabling states to regulate their own electricity markets.
This legislation shifts control from the federal government to state governments regarding the generation, transmission, and distribution of electricity within their borders, and in his opinion, it has engendered duplication of regulation even when the national electricity supply situation is still in limbo.
Yusuf, explained that the ATC&C losses represent the percentage of electricity generated but not paid for by consumers, directly acting as a primary driver of liquidity crises in the power sector. High ATC&C losses mean that Distribution Companies (DisCos) receive significant energy but fail to turn it into cash revenue, resulting in a severe “liquidity gap” across the entire power value chain.
Explaining how ATC&C affects liquidity management he said , “When ATC&C losses are high, DisCos cannot collect enough revenue to cover the cost of electricity purchased from Generation Companies (GenCos) and transmission services.
“High, uncollected revenues prevent DisCos from investing in necessary infrastructure, such as prepaid meters, transformers, and network maintenance. A 1 per cent increase in meter installation can decrease ATC&C losses by roughly 0.8 per cent but low cash flow prevents this investment, creating a cycle of high losses and low liquidity.
“When DisCos fail to collect revenue, they cannot meet their payment obligations to the Nigerian Bulk Electricity Trading (NBET) Plc and other market participants. This creates a liquidity crisis where GenCos cannot pay for gas, threatening the stability of the power supply.”
He argued that high ATC&C losses create a vicious cycle where poor infrastructure leads to high losses, which in turn causes low revenue collection, leaving no cash for the improvements necessary to reduce losses.
Also, speaking on the issue, Barrister Chukwuebuka Ibeh, Nigerian Energy Lawyer, said, “I would say the exercise was necessary and sound, even if the outcomes have fallen short of expectations. At the time, government clearly recognised that it could no longer continue as the sole owner, operator, and financier of the electricity sector. Opening up the space to private participation was inevitable.
“On the positive side, the reform successfully dismantled the old PHCN monopoly and introduced private sector participation, particularly in generation and distribution. Installed generation capacity has increased significantly compared to the pre-privatisation era, and the regulatory environment has become more structured, with NERC developing clearer rules around licensing, tariffs, metering, and consumer protection.
“We have also seen the emergence of embedded generation, mini-grids, renewable energy projects, and captive power frameworks; options that were either non-existent or poorly developed before the reform. While power supply remains unreliable, it would be unfair to say nothing has changed.”
Ibeh, said Nigeria adopted a transitional electricity market model, with the expectation that the sector would gradually move toward a fully competitive market. That transition, however, has stalled, he observed, adding, “What we have today is a sector that operates in an uncomfortable middle ground; not fully commercial, yet no longer fully state-funded.”
DisCos, for instance, are expected to function as private businesses, but tariffs are heavily influenced by political considerations, and enforcement is weak. Until these contradictions are addressed, the model will continue to underperform, regardless of how well it looks on paper.
Speaking on gaps, he said, “For a long time, tariffs were not cost-reflective, and this created a liquidity crisis across the value chain. GenCos struggle to get paid, gas suppliers are owed, and investments are discouraged.
“Second is the distribution segment, which remains the weakest link in the sector. High technical and commercial losses, poor infrastructure, inadequate metering, and governance issues have significantly limited the gains of the reform. Without fixing distribution, improvements in generation and transmission will not translate into better supply for consumers. And many others.”
He, however, noted that a reversal of the reform is neither realistic but the focus should be on fixing what is not working, rather than going back to the old model.
The Electricity Act 2023 presents a major opportunity, particularly with the decentralisation of electricity regulation to states. If properly implemented, this could unlock sub-national investments, encourage competition, and improve service delivery. Transmission also requires urgent attention, including private sector participation and innovative financing structures, he noted.
Ibeh, said when government reviews the policy, the sector will likely see investments in renewables, embedded generation, mini-grids, captive power solutions, metering, and state-led electricity markets. These segments offer clearer risk profiles and quicker returns compared to large-scale grid generation.
Going forward, Nigeria’s electricity sector is likely to become more decentralised and state-driven, rather than relying solely on a single national grid model, he added.
On his part, the president of the Nigerian Consumer Protection Network (NCPN), Kunle Kola Olubiyo, said government hurriedly handed over national assets to those who do not have prerequisite qualifications and expertise to run the system.
He argued that for electricity generation to be done right in Nigeria, it has to be controlled by the private sector, as the public sector has a mindset of “wastages.”
According to him, power generation has to be private sector-led, because public sector business model is not about making profit.
He maintained that private sector business model is about efficiency and revenue optimisation, customer centricity, and generation should be public sector led.
Olubiyo, added that distribution is still public sector-led with some semblance of equity with government having a stake, while Transmission Company of Nigeria (TCN), is a misnomer to remain a public sector business model.
He noted that the essence of privatisation was to create a competitive electricity market and thus applauded the recent 5th alteration of the Nigerian Constitution, which moved electricity from the exclusive to the concurrent list.
Olubiyo, called on the federal government to reverse privatisation of the power sector, describing it as a failure, adding that the way out of the incessant power supply failure was for the federal government to source for money and pay back the investors.
“It is either the federal government do a mid-term review of the privatisation process or total reversal of the privatisation. We did not get it right and you cannot give something on nothing.
“ There is a high level of fiscal indiscipline, they make huge sum of money, they gain the system, and they don’t do remittance,” he said.
Olubiyo said that the money government had spent on post-privatisation in a supposedly private driven sector was more than what government was giving to the defunct National Electric Power Authority (NEPA) and the Power Holding Company of Nigeria (PHCN).
“The federal government needs to reset the process and in doing that, we need to do a total reversal.
“As little as transformers, buying of materials that are needed to be used in maintenance, these investors cannot even do that.
“ If you have investors who cannot replace cables, expand the network then the process is not working, ” he said.
Olubiyo said that it was the non-state actors, the consumers that had been investing in materials to repair transformers and other electrical faults.
He said that such investment does not come with refund, so the essence of privatisation had failed and this is not fair to the economy.
“ We need to get the economy up and running, electricity is the major enabler for growth, job creation and industralisation.
“If you don’t get it right with electricity, it will equally transcend into social insecurity because youths are not gainfully employed.
”When electricity is perfect and working, people will not be waiting for government, the private sector will drive the economy.
”If we can’t make progress, we should be able to go back to the drawing board where we were for public interest, ”he said.
The power sector was privatised in November 2013, with six power generation plants and 11 electricity distribution companies handed over to the private sector.
On its part, the Manufacturers Association of Nigeria (MAN) has declared the exercise unfruitful. MAN said beneficiaries of the privatisation lacked the technical and financial capacity to operate and deliver power optimally.
MAN, also decried the incessant increase in electricity tariff, which it said had hindered the performance of the manufacturing sector and growth of the economy.
The director-general (DG) of MAN, Mr. Segun Ajayi-Kadir, urged the government to commission a review of the performance of power Distribution Companies (DisCos) after the last unwarranted increase.
It also asked government to conduct a study on the impact of the increase on the manufacturing sector, in particular, and businesses and households, in general
Ajayi-Kadir urged the government to sincerely and critically interrogate the so-called cost reflective tariff template of the DisCos, and audit their level of commitment to investment in distribution infrastructure.
He emphasised that electricity was a critical input in manufacturing processes, with significant effect on production cost and prices of products.
He said, “It was based on the critical importance of energy security in achieving the industrial aspiration of Nigeria, that the power sector was privatised in 2013 to improve the scale of energy supply to the nation, particularly the industries.
“Unfortunately, this particular privatisation has not yielded the desired results. It is widely believed that this is because the operators in the value chain lack the technical and financial capacity to operate and deliver optimally.”
Ajayi-Kadir pointed out that the Nigerian power sector’s installed capacity, put around 10,000 megawatt (MW), had not been fully utilised due to the limited capacity of the power generating companies (GenCos) and DisCos to generate and distribute adequate electricity nationwide.
He said, “Despite the inability to meet the consumer demand, we have witnessed consistent increase in tariff without a commensurate and good quality supply.
“According to the National Bureau of Statistics (NBS), the electricity supply stood at 5,909.83 (Gwh) in Q2 2023 but reduced to 5,769.52 (Gwh) in Q1 2024 and 5,612.52 (Gwh) in Q2 2024, when the tariff increase of over 230 per cent was implemented.
“Thus, indicating 5.03 per cent decrease year-on-year and 2.72 per cent quarter-on-quarter.”
According to him, MAN has severally advocated an increase in electricity supply from the abysmal average of 4,000MW of electricity per day for over 200 million people.
He said Nigeria needed more than 30,000MW of electricity to appreciably meet the growing electricity demand by businesses and households in the country.
Ajayi-Kadir also advised the government against yielding to any proposed increase in electricity tariff because it would be “inimical to the competitiveness of Nigerian products and businesses”.
He said such increase would also further exacerbate the effect of high cost of production, worsen the current inflationary pressure, aggravate the pressure on the disposable income of the average Nigerian, increase the unsold inventory of manufacturers, erode their profit margin, increase unemployment rate, and lead to closure of more private businesses.
The DG stated, “The persistent increase in tariff means that consumers will continue to bear the brunt of the inefficiency in the electricity value chain. “As it stands, manufacturers are disadvantaged as the increase cannot be transferred to consumers who are currently battling with low purchasing power.
“However, I am not certain that the federal government has reached the conclusion that electricity tariff would be increased. I hope not.”
According to MAN, it goes without saying that incessant increase in electricity tariff in Nigeria is hindering the performance of the manufacturing sector and growth of the economy.
It said, “No nation can attain significant industrial development without energy security, which is timely access to sustainable and cost-effective energy.”
MAN added that “sustainable and low-cost energy supply provides incentives for scale production and competitiveness of the industrial sector”.
