Nigeria’s $2.5bn power privatisation fades into 13 years of darkness

Thirteen years after handing electricity distribution and generation to private investors, Nigeria still struggles to deliver reliable power, exposing the cost of broken promises, inadequate investment, and a reform programme that has yet to fulfil its ambitions.

“I congratulate our new owners who have taken over the engines and cables that are expected to drive not just the electricity industry but also the socio-economic well-being of the nation,” former president Goodluck Jonathan said after handing private buyers’ certificates of ownership at a 2013 glitzy ceremony in his villa.

However, for millions of Nigerians, the promise of socio-economic benefit through electricity privatisation has remained largely unfulfilled.

Homes still rely on petrol generators, businesses spend heavily on alternative energy, and manufacturers struggle with the cost of powering factories in Africa’s largest oil-producing economy.

The then Power Holding Company of Nigeria (PHCN) was split into 11 electricity distribution companies and six generation companies were formed after the sector was privatised in November 2013, for about $2.5 billion in total. The government retained ownership of the transmission network.

The November 2013 privatisation was designed to end decades of government-dominated electricity management, attract private capital, improve operational efficiency and establish a commercially sustainable electricity market.

A total of the power distributors include Abuja, Benin, Eko, Enugu, Ibadan, Ikeja, Jos, Kaduna, Kano, Port Harcourt, and Yola Discos.

Some of the generation companies include Transcorp Power Limited, Shiroro Hydroelectric Power Station, Sapele Power Plc, Ughelli Power Plc, Geregu Power Plc, and Kainji Hydroelectric Power Station.

Findings showed private buyers for five generation companies and 10 distribution firms collected their share certificates and operating licenses from Jonathan during the ceremony.

Most bid winners were oligarchs connected to the political elite, like former military president Abdulsalami Abubakar, Sani Bello, former military governor of Kano State, and tycoon Emeka Offor, but with some recognised technical partners like Siemens and Manila Electric.

Thirteen years after that transfer, the country is still battling an electricity crisis that has become one of the biggest constraints on industrial development, household welfare and economic competitiveness.

The expectation was that private capital and commercial discipline would improve electricity supply, expand infrastructure and reduce the financial burden on the government.

Instead, the sector has become trapped between inadequate electricity generation, ageing transmission infrastructure, financially distressed distribution companies, mounting industry debts and regulatory decisions that have repeatedly undermined investor confidence.

Only 199MW output growth in 13 years

Average output in 2014, the first full year after privatisation, was 3,419 megawatts. Real-time generation on November 1, 2026, stood at 3,617.81 megawatts, a gain of about 199 megawatts, or less than 6 percent, over more than a decade.

“Clearly, good habits did not follow ownership: a benign public monopoly has become a virulent private one,” said Eyo Ekpo, CEO of Excredite Consulting Ltd, former Commissioner of Market Competition & Rates at the Nigerian Electricity Regulatory Commission (NERC).

Data from the latest NERC Q2 2026 report showed average Aggregate Technical, Commercial, and Collection (ATC& C) losses stood at 36.23 percent in the second quarter of 2026 against a 16.92 percent target for DisCos.

“The failure is not in laws, tariffs or GenCo capacity. It is institutional: poor regulatory/market credibility, settlement indiscipline, centralised thinking in a decentralised reality, and neglect of productive customers,” Ekpo said.

He said, “A deliberate, disciplined process must lay foundations before transactions, driven by educated political will and executed knowledgeably through Policy, Law and a regulator, recognising that credible market entities and functionaries precede deals and regulatory orders”.

Barth Nnaji, chairman and founder of Geometric Power and former minister of power, identified infrastructure deficits, revenue collection losses, liquidity constraints and systemic bottlenecks across the electricity value chain as major reasons distribution companies have struggled to meet consumers’ expectations.

He placed particular emphasis on what he described as the government’s failure to honour its commitment to allow investors to operate under cost-reflective tariffs.

“Many investors entered the market during the 2012–2013 privatisation exercise on the understanding that electricity prices would eventually reflect the actual cost of supplying power,” said Nnaji.

Nnaji argued that even the revised tariffs did not adequately reflect the actual cost of electricity generation, transmission and distribution.

“The inability to recover the cost of electricity supplied has made the business difficult to finance. For consumers, the outcome has been an electricity market where higher tariffs have not necessarily translated into more reliable supply,” Nnaji said.

The bottlenecks

Nigeria has an installed generation capacity of approximately 13,000 megawatts, but the volume of electricity available on the national grid has consistently remained substantially below that level.

The gap reflects several structural problems, including inadequate gas supply, ageing generating equipment, transmission constraints and the inability of financially distressed operators to undertake necessary maintenance and expansion.

Nnaji argued that the absence of government-backed risk guarantees has further discouraged investment in new power plants.

He pointed to the suspension of the partial risk guarantee instrument in 2015 as a major setback for investors seeking to develop grid-connected generation projects.

According to him, the Azure Power project in Edo State was the only power plant developed under that guarantee arrangement, while the subsequent withdrawal of the instrument weakened the confidence required to finance new projects.

“For 11 years, no new power plant has been built,” he said, attributing the investment gap partly to the absence of an effective government risk guarantee.

Nnaji estimated that installing one megawatt of generating capacity costs more than $1.5 million.

Much of the equipment used in power plants, transmission infrastructure and distribution networks is imported, exposing operators to foreign exchange volatility and the rising cost of equipment replacement.

The experience of Aba Power, the distribution subsidiary of Geometric Power, illustrates the scale of investment required even within a limited electricity network.

Nnaji said the company spent approximately N50 billion providing smart meters to more than 96 percent of customers within its ring-fenced network.

For Nigerian businesses, the consequences of the sector’s underperformance extend well beyond the electricity market.

Manufacturers, shopping centres, hospitals, hotels and small businesses have increasingly had to make their own arrangements to secure reliable power.

Diesel and petrol generators, solar installations, inverters and embedded generation systems have become essential components of business operations rather than occasional alternatives.

Consumers pay the price

This also means that companies are effectively paying twice for electricity usage.

Once for electricity from the public grid and again for the infrastructure required to keep their operations running when supply fails.

For manufacturers, the additional expenditure raises production costs, weakens competitiveness and limits the ability to expand operations or employ more workers.

Small businesses face an even more difficult challenge because they often lack the financial capacity to invest in sophisticated alternative power systems.

The consequences are also felt by households, where unreliable electricity affects food preservation, education, healthcare and daily economic activity.

Adetayo Adegbemle, executive director and convener of PowerUp Nigeria, an electricity consumer rights and power sector policy advocacy organisation, acknowledged that the sector has evolved since privatisation, particularly in its legal and regulatory architecture.

“The power sector has grown and evolved since privatisation, no doubt about that,” he said, noting that some of the gains from the reforms have yet to fully materialise.

Nigeria has introduced significant changes to its electricity laws and regulatory arrangements, including the Electricity Act 2023, which created opportunities for states to establish and regulate their own electricity markets.

The development has opened the door for subnational governments to pursue electricity solutions suited to their economic and infrastructure needs.

It has also encouraged discussions around embedded generation, independent electricity markets, renewable energy and alternative distribution arrangements.

But Adegbemle believes these developments will have limited economic impact without a clearer national direction.

One of his biggest concerns is the absence of an electricity policy firmly anchored on Nigeria’s industrialisation ambitions.

“One major aspect that I have always harped upon, and I am yet to see improvement in, is our overall policy and what I keep calling putting the national interest first,” he said.

For Adegbemle, the priority should be building a national grid capable of supporting industrial expansion and providing dependable electricity to businesses across the country.

“We need to drive our power sector policy more in industrialisation of Nigeria,” he said.

He argued that a functioning national grid is essential to making the electricity business profitable, attracting long-term investment and creating employment opportunities.

The argument raises an important question about the direction of Nigeria’s electricity reforms.

While the market has increasingly focused on tariffs, commercial viability and the financial sustainability of individual operators, the broader economic objective of supplying reliable electricity to drive industrial growth has remained difficult to achieve.

Will 2023 Electricity Act solve the problem?

The Electricity Act 2023 has introduced a new phase in the sector’s development by allowing states to take greater responsibility for electricity generation, transmission and distribution within their territories, subject to the applicable regulatory and constitutional framework.

The decentralisation offers opportunities for investment in local power markets, particularly where industrial clusters and commercial centres require more dependable electricity.

However, it also creates the risk of a fragmented electricity market if state-level initiatives develop without adequate coordination with the national system.

For an economy seeking to expand manufacturing, agriculture, mining and digital services, reliable electricity remains a critical national infrastructure requirement.

Nnaji’s argument is that investors cannot be expected to commit billions of dollars to electricity infrastructure when the rules governing their ability to recover costs remain uncertain.

Adegbemle’s position is that commercial sustainability must serve a larger national objective: industrialisation, employment creation and economic growth.

Both arguments point to the same underlying problem. Nigeria’s electricity reform has struggled to reconcile the commercial interests of private operators with the government’s responsibility to provide affordable and reliable electricity.

Oladehinde Oladipo

Dipo Oladehinde is a skilled energy analyst with experience across Nigeria's energy sector alongside relevant know-how about Nigeria’s macro economy. He provides a blend of market intelligence, financial analysis, industry insight, micro and macro-level analysis of a wide range of local and international issues as well as informed technical rudiments for policy-making and private directions.