The Federal Government has announced a fresh injection of over N1.2 trillion to build substations and distribution infrastructure.

The disclosure came as distribution companies (DisCos) continue to reject 1,400 megawatts of electricity when Nigerians are experiencing power outages despite over $7.5 billion borrowed under the previous administration to improve transmission and distribution infrastructure.

When the government was borrowing under former President Muhammadu Buhari, the Transmission Company of Nigeria promised to increase transmission capacity to 20,000 megawatts by 2021. However, the capacity is only at an untested 8,000MW as of 2024, and the 12,000 megawatts target remains unrealistic.

While the Minister of Power, Adebayo Adelabu, lamented the rejection of power by the DisCos on Sunday, Nigeria has reduced electricity exports to Togo, Benin and Niger, which generate foreign exchange. The Nigerian Electricity Regulatory Commission (NERC) has also prevented manufacturing companies from purchasing energy directly under the Eligible Customer Policy.

The capping of electricity exports to six per cent of generation has already threatened the West African Power Pool north core transmission line, financed to the tune of $692 million by the World Bank (WB), the French Development Agency (FDA), the African Development Bank (AfDB), the European Union (EU), and the Federal Government of Nigeria. The 913-kilometre transmission project, designed around Nigeria as the key export point, was intended to create a regional electricity market for the Economic Community of West African States.

While Nigeria expects to increase electricity tariffs by 1 October, when the bilateral market will fully take effect, some generation companies told The Guardian yesterday that some DisCos and bulk traders are already approaching them to sign contracts for direct off-take.

While electricity generation has been predicated on improved electricity supply, Nigeria’s electricity generation trend in the last week, according to the Nigerian Independent System Operator (ISO), showed that energy on the grid was between 2,800MW and 5,000MW.

According to ISO, load offtake by distribution companies was 4,683MW as of yesterday. However, the total generation on the grid was 3,500MW.

Currently, over 80 per cent of generation plants are operating below capacity. The Guardian learnt that the TCN asked generation plants to keep output below a threshold to manage the grid and prevent collapse.

For instance, most hydropower plants generate only about 25 per cent of their capacity, including the new 700MW Zungeru plant, which is capped at 175 MW.

Adelabu disclosed that the N1.2 trillion ($800 million) under the Presidential Power Initiative (PPI) would ensure the construction of substations for Lot 2 and distribution lines for Lot 3 at $400 million each.

Lot 2 covers the franchise areas of Benin, Port Harcourt, and Enugu DisCo, while Lot 3 covers the franchise areas of Abuja, Kaduna, Jos, and Kano DisCos.

Speaking from Beijing, China, during a facility tour of TBEA Southern Power Transmission and Distribution Industry, Adelabu said that while electricity generation peaked at 5,170 megawatts on Friday last week, generation companies were forced to ramp down by 1,400 megawatts due to the DisCos’ inability to absorb the supply.

“This is truly regrettable, considering that the government is on course to increase generation to 6,000 megawatts by the end of the year,” Adelabu said, adding that transmission and distribution infrastructure has become old and worn, leaving the country with an epileptic power supply.

Adelabu said only 41 per cent of Nigerian industries are on the grid, stressing, “They did not see the national grid as reliable and dependable. So many of them now operate their own captive, self-generated power.”

Under the previous government, Nigeria borrowed over $7.5 billion from the World Bank, African Development Bank (AfDB), Japan, France Development Agency, and other financiers to improve the country’s weak transmission network and grid.

However, issues such as widespread vandalism, corruption, political interference, infrastructure misalignment and the inability of DisCos to increase their off-taking capacity have undermined these efforts, rendering the financial support ineffective. This includes a $486 million loan from the World Bank under the Nigeria Electricity Transmission Project (NETAP), and the $2.3 billion Siemens deal to enhance transmission infrastructure.

Japan had extended a $242.4 million loan to Nigeria for the Lagos and Ogun Power Transmission System Improvement Project. Additionally, the House of Representatives disclosed in 2017 that Nigeria had received $1.5 billion in foreign loans for the Transmission Company of Nigeria, with another $500 million loan being negotiated with the Islamic Development Bank (IsDB).

The IsDB approved a total financing of $1.8 billion for Nigeria, including the electricity loan. In 2020, former Finance Minister Zainab Ahmed announced that Nigeria requested a $3 billion World Bank loan for the transmission network, provided in four tranches of $750 million each. The African Development Bank (AfDB) also approved a $210 million loan in 2019 to upgrade the electricity transmission and distribution network.

As of March this year, The Guardian estimates that over 117 132kv/330kv electricity towers have been vandalised nationwide between January 2022 and February 2024. On the other hand, about 90 of the projects being constructed by TCN are hindered as state governments demand over N600 billion for the right of way.

On the issue of the construction of the super grid, the minister said the national grid in its current state could not support the vision for the power sector, disclosing that 90 per cent of the approval required for the construction is in place and would be concluded soon. The super grid is designed for Western and Eastern corridors.

While Nigeria cannot wheel the current generation capacity instead of dispatching it to international customers for foreign exchange earnings, NERC, in order NERC/2024/044, said supply to international customers must not exceed six per cent of what’s on the grid over a given period. For instance, six per cent of 5,000MW is only 300MW.

According to the Minister, if the distribution companies reject 1,400MW, 1,100MW would be a waste as only 300MW can be sent to international customers.

Managing Director of Mainstream Energy Solutions Limited Lamu Audu said Nigeria needs to balance its domestic energy needs with the potential benefits of exporting electricity to other countries.

He said exporting power would generate foreign exchange (FX) revenue and give Nigeria crucial economic and political leverage over neighbouring nations.

Audu suggests that the government should make it a policy to allow a portion of generated energy to be sold internationally to ease pressure on the FX market and support the recovery and expansion of ageing infrastructure. He stressed the challenges in obtaining the necessary FX to purchase equipment abroad.

With the country already gripped by a foreign exchange crisis, Audu argued that enabling FX inflows through power exports would also make Nigeria more attractive to international investors, who are currently deterred by the difficulty in generating FX revenue.

Audu called for private investment in the power projects, which rely on government funding and sovereign loans, arguing that a viable power export corridor is essential for attracting such investments.

The Executive Coordinator of NEPA Wahala, Emeka Ojoko, noted that improving distribution infrastructure, particularly metering, must be the primary focus in the near future.

Ojoko said: “DisCos reject load because they can’t pay for it due to customers’ apathy towards estimated bill payment, which can only be cured by full metering.”

He was also worried over the sector’s Aggregate Technical Commercial and Collection losses, stressing that if the losses declared by DisCos remained at abysmally high levels, the power sector would remain illiquid and unattractive to investors.

To him, as long as the proposed capital injection is carried out transparently, efficiently and accountably, anything that can be done to improve distribution and transmission should be encouraged.

Infrastructure expert Joe Tsavsar addressed the issue of load rejection by DisCos, a problem he attributes to Nigeria’s weak transmission infrastructure.

Many substations are outdated, dating back to the era of the National Electric Power Authority (NEPA), and have become obsolete due to a lack of maintenance and replacement.

This situation stems from the failure to properly implement significant budget provisions in the power sector and the poor recruitment and retention of qualified personnel.

Tsavsar highlighted the critical role of protection engineers, who are essential in managing transmission infrastructure. However, he noted that many trained engineers have been replaced by inadequately trained personnel, creating dissatisfaction among staff.

Tsavsar raised the misalignment of resources in budget implementation as a major concern. He criticised the tendency to locate projects based on political considerations rather than power demand.

According to him, transmission projects make no difference because they are often situated to satisfy the geographical interests of influential figures, such as ministers and managing directors, rather than addressing the genuine need for power.

Tsavsar said this has led to DisCos rejecting power in certain areas, particularly where transmission infrastructure is weak in commercial zones but more robust in rural areas with little economic activity to justify bill collection.

Tsavsar called for government intervention to improve transmission infrastructure, emphasising the need for collaboration with DisCos to focus on areas with real power demand rather than on political interests.

He stressed that investments should be strategically directed to effectively address the country’s power problems.

According to Tsavsar, the fundamental issue is Nigeria’s lack of accurate data on power demand. He claims that even the Nigerian Electricity Regulatory Commission (NERC) does not clearly understand the country’s actual power demand. This lack of data makes it difficult to address the power problem effectively.

Tsavsar used a simple analogy to illustrate the situation: ‘If someone wants to buy a generator, they must first know their power load demand. Without this knowledge, they risk buying a generator that is either too small, leading to frustration, or too large, resulting in unnecessarily high operating costs.’

He insisted that the power sector would continue to struggle until Nigeria conducts a proper demand analysis of its power requirements and aligns supply to meet current and future demands.

Chief Executive Officer of Integrated Africa Power (IAP), Chigozie Nweke-Eze, sees the injection of funds into Nigeria’s power sector as a much-needed intervention.

He noted that this financial boost would encourage further investments in the sector’s generation and distribution segments.

Nweke-Eze highlighted that increased funding could facilitate the onboarding of renewable power generation, which would benefit the environment and contribute to climate change mitigation efforts.

He also emphasised the importance of carefully awarding Engineering, Procurement, and Construction (EPC) contracts. He urged that these contracts be handled strategically to ensure efficient delivery, adherence to budget, and timely completion.