Mission-300: Nigeria’s 5-Year Energy Compact (Part two)

This is the second part of the opinion piece on Nigeria’s 5-year Energy Compact, which is a 26-page technical document. Admittedly, the comments made here are generally in nature and are mainly aimed at general policy issues.

Nigeria’s National Energy Pact has been developed in alignment with the Africa Region Energy Compact and the United Nations Energy Compact, as is also the case with the other national energy compacts of the other eleven Anglophone and Francophone countries presented at the recent African Energy Summit in Tanzania. This is the combined template that has been adopted by Mission-300, the African Development Bank-World Bank programme to work collaboratively with Sub-Saharan African countries to provide access to electricity to 300 million Africans by 2030. It was misleading when I stated in my last week’s article that the energy compacts of twelve African countries presented at the January 27-28 African Energy Summit in Dar Es Salam, Tanzania, were based on a template prepared by the World Bank. This is regrettable.

Read also: Mission-300: Nigeria’s 5-year energy compact (Part One) 

A key aspect of the template or framework used by the twelve African countries in developing their national energy compacts is five key pillars. For example, the preambles of the national energy compacts of Nigeria and Liberia will show striking similarity in the way they state the five pillars, which provide the basis of their respective national energy compacts.

Nigeria’s preamble to her national energy compact states, “To achieve these ambitious targets, a time-bound and realistic action plan is included in the Compact. The action plan outlines the various reform actions to be taken across five pillars: (a) expanding power generation and investment into transmission and distribution infrastructure at competitive costs; (b) working towards financially viable utilities that provide reliable service; (c) incentivising private sector participation to unlock additional resources; (d) embracing distributed renewable energy (DRE) and clean cooking solutions for affordable last-mile access; and (e) leveraging the benefits of increased regional integration.” The preamble to the Liberian national energy compact states the five pillars in almost identical phraseology. The three other Anglophone countries, Malawi, Tanzania, and Zambia, took slightly different approaches, but they all explicitly responded to and used the five pillars as the bases for developing their national energy compacts.

“Without policy clarity on privatisation, it is doubtful if we can get more than $2 to $5 billion in fresh private sector investment in the next five years in the power sector, except if new initiatives by the Lagos State Government and a few others bear fruit.”

Another common feature of the other Anglophone countries of Liberia, Malawi, Tanzania, and Zambia was extensive consultations with various stakeholders in fashioning their national energy compacts, which is clearly stated in the preambles to their national compacts. This is visibly absent in the case of Nigeria. Thus, the five pillars of the national energy pacts of African countries provide a basis of comparison of their interpretation of the five pillars and the policies, strategies, and action plans they have put in place to realise their energy compacts.

The following is a brief review of the Nigerian energy sector from the information gleaned from the Nigeria Energy Compact document: 1) The Nigerian power sector is largely private-sector driven and unbundled with six power-generating companies (Gencos) and eleven distribution companies (DisCos), with the transmission company owned 100 percent by the government. 2) 79 percent of our power supply is from thermal plants, which on average are 20 years old, which means there has been little direct investment in new power plants in Nigeria in the last 20 years. 3). The DisCos are weak because of gross underinvestment and undercapitalisation since partial privatisation in 2013, with “aggregate technical, commercial, and collection (ATC&C) losses remaining extremely high, with DisCos reporting total losses on average of about 42 percent, comprising 21 percent technical and commercial losses and 26 percent collection losses.” 4). Nigeria has the greatest absolute electricity access deficit globally, with 86 million people without access, even with 61 percent national access to electricity; 5) the power system is characterised by regular power outages. 6). Also to be noted is stagnation in power supply and transmission in the last four years: the Transmission Company of Nigeria announced a new peak transmission of 5,543.20 megawatts (MW) on February 13, 2025, but this is less than the peak transmission of 5,552.80 MW it announced on January 8, 2021.

To tackle these challenges, the Nigeria Energy Compact proposes as follows: 1). An ambitious plan to achieve universal electricity by 2030, which is part of the Energy Transition Plan (ETP) approved in 2022; and 2) this is to be achieved with the investment of over $23 billion, with $15.5 billion expected to come from the private sector and end-users themselves.

Read also: Nigeria”s Energy Boom: Indigenous growth, global impact

As the national energy compact document rightly or courageously pointed out, “Nigeria’s capacity to unlock and sustain almost US$15.5 billion in private financing requires critical market enabling conditions currently not in place.” To be sure, the global investment plan of $23.2 billion is not out of place, considering that Zambia, with a population of 20.1 million people, less than 10 percent of our population, envisages a total investment of $11.9 billion in the same period in its national energy pact. However, what creates concern in Nigeria’s case is the lack of an enabling business environment for private sector investment in the power sector, which essentially means a bold and unequivocal privatisation plan with related adequate tax incentives, the types we are witnessing now in the oil and gas sector.

Our existing thermal plants are, on average, 20 years old. Without policy clarity on privatisation, it is doubtful if we can get more than $2 to $5 billion in fresh private sector investment in the next five years in the power sector, except if new initiatives by the Lagos State Government and a few others bear fruit. In all the pages of the Nigeria Energy Compact, nowhere is there a hint on privatisation, apart from a reference to “incentivise private sector participation to unlock additional resources,” which is one of the five pillars in the template.

Going through Nigeria Energy Compact, which was produced without the necessary consultation with diverse stakeholders, unlike other African countries, it is clear that the political will for a private sector-driven transformative plan to achieve Mission-300 and United Nations Sustainable Development Goal 7 (SDG7) is not there. What this means is that Nigeria Energy Compact’s plan to achieve universal electricity access by 2030 is totally unrealistic and unattainable—a pipe dream, a pie in the sky. 2030 is just five short years away. Let’s have a rethink.

Mr Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos.