Investors are quietly changing how they approach Nigeria’s long-struggling electricity sector, opting for state-led power deals instead of relying on the national grid. This shift reflects growing confidence in smaller, more structured projects that offer clearer demand, defined off-takers, and better governance. For many financiers, these localized arrangements present a more predictable path to returns in a sector historically weighed down by uncertainty.
The trend, highlighted in a recent report by PwC, stems from the implementation of the Electricity Act 2023. The law transferred significant regulatory powers from federal authorities to Nigeria’s 36 states, allowing them to license and manage electricity markets within their jurisdictions. Two years on, the reform is beginning to reshape not only regulation but also where investment capital flows.
Unlike the past, when power investments depended heavily on the financial health of national institutions and distribution companies, investors are now assessing projects individually. According to discussions at PwC’s power roundtable, bankability is increasingly tied to regulatory clarity, credible tariffs, and visible cash flow. States are packaging integrated proposals that combine generation, distribution, and consumption within specific areas—often anchored by public infrastructure such as hospitals and water facilities—making financing discussions more straightforward.
Nigeria’s electricity challenges remain significant. Although the country has an installed capacity of about 14 gigawatts, actual output typically ranges between 4,000 and 5,000 megawatts due to gas shortages, weak transmission networks, and longstanding inefficiencies. Industry experts, including officials from the African Export-Import Bank, argue that funding is not the main issue; rather, the challenge lies in structuring projects with clear risk-sharing frameworks and reliable revenue models.
At the state level, progress is uneven. While more than 15 states have begun activating electricity markets, only a few—particularly Lagos State—are moving quickly with well-structured frameworks. Lagos has adopted a phased and investor-friendly approach, integrating electricity planning into broader economic development goals. Meanwhile, the federal government, led by Power Minister Adebayo Adelabu, continues to focus on strengthening the national grid, improving transmission, and expanding metering. As revenues in the sector rise and grid performance improves, the balance between federal oversight and state-led innovation is shaping a new era for Nigeria’s power industry.
source: Business day