Nigeria cannot grow in darkness, by Stephanie Shaakaa

Nigeria stands at an inflection point. While policymakers debate subsidy reforms and fiscal consolidation, a quieter crisis silently erodes the foundation of economic ambition: electricity. Without reliable power, no nation—regardless of natural resources or human capital—has sustained rapid industrialisation or lifted millions into prosperity.

## Why Is Nigeria's Power Sector the Bottleneck?

The numbers are stark. Nigeria's installed generation capacity exceeds 13 GW, yet actual delivery to the grid averages 4–5 GW daily. Transmission losses, theft, and ageing infrastructure mean manufacturers, hospitals, schools, and households resort to diesel generators—a hidden tax on productivity that costs the economy an estimated $29 billion annually. The gap between potential and reality is not accidental; it reflects decades of underinvestment, policy reversals, and systemic inefficiency.

Manufacturing competitiveness hinges on predictable energy costs. A textile factory in Lagos paying $0.25 per kWh via generator cannot compete with competitors in Ghana or Kenya paying $0.12. The informal sector—Nigeria's largest employer—relies on off-grid solutions: solar kits, batteries, and generators. These are adaptive, not sustainable. They keep businesses alive but prevent them from scaling.

## What Do Investors Signal About Nigeria's Energy Future?

Recent trends reveal cautious optimism mixed with alarm. Private sector renewable investments—particularly solar and mini-grids—have grown 40% year-over-year, yet they remain marginal. Foreign direct investment in power generation stalled in 2024 after the 2023 privatisation disruptions. Domestic PE and VC firms are pivoting toward distributed energy solutions, signalling a loss of confidence in the centralized grid model.

The government's fiscal constraints are real. Electricity subsidy removal was necessary but painful; tariff hikes have strained low-income households and small enterprises. Yet tariff reform alone cannot fix the underlying problem: the power sector requires $25–30 billion in capex over five years to modernise generation, transmission, and distribution. Federal spending on power infrastructure fell 35% in 2024 compared to 2022.

## How Can Nigeria Unlock Economic Growth Through Energy?

Three moves matter immediately. First, accelerate independent power producer (IPP) frameworks for renewables and gas-fired plants outside the monopoly distribution model. Second, enforce cost recovery for distribution companies—eliminating phantom loads and non-technical losses that currently exceed 25%. Third, ring-fence tariff revenue for reinvestment in the grid rather than cross-subsidising other sectors.

The evidence from peers is instructive. Ethiopia's Grand Renaissance Dam has altered regional power politics. Kenya's geothermal expansion reduced generation costs 60% in a decade. South Africa's load-shedding crisis—worse than Nigeria's—finally triggered serious procurement of private generation. Nigeria cannot afford to wait for crisis to force reform.

Darkness is not destiny. But neither is it costless. Every month without reliable electricity costs the economy productive capacity, deters investment, and undermines the credibility of policy reform elsewhere. Nigeria's growth trajectory depends on treating electricity not as a sector to manage but as the critical infrastructure that determines whether the next decade yields expansion or stagnation.

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