By Tobi Oluwatola

Trap 1: The industrial grid defection dilemma
For decades, Nigeria’s biggest economic engines have lived off the grid entirely. Dangote Industries, from the 650,000 barrel-per-day refinery in Lekki to the cement plants in Obajana and Ibese, runs on hundreds of megawatts of its own gas and heavy fuel oil generation. Industrial clusters in Ikeja, Bompai and Trans-Amadi keep their own generator fleets because the grid cannot promise stable voltage or uninterrupted supply. The small “I better pass my neighbor” generator outside your tailor’s shop runs on the same logic at a much smaller scale.

As Nigeria legalises bilateral contracts and third-party access,DisCos face what power economists call the utility death spiral. Big industrial and commercial customers pay higher tariffs, and those tariffs quietly subsidise the household in Mushin or Sabon Gari. If the heavy users leave for bilateral deals or self-generation without contributing to the cost of the shared system, the DisCos will be left with the customers who are most expensive to serve and least able to pay cost-reflective tariffs. Without properly funded, targeted lifeline subsidies from government, that is a fast road to bankruptcy.

Trap 2: Private off-take versus the public grid, the susquehanna precedent
The United States recently offered a useful lesson at the Susquehanna Nuclear Power Plant in Pennsylvania. Talen Energy (Genco) agreed to sell power directly to an Amazon Web Services (AWS) data centre built next door, through an amended Interconnection Service Agreement that would have raised the behind-the-meter connection from 300 MW to 480 MW, on the way to a campus of up to 960 MW.

In November 2024 the Federal Energy Regulatory Commission (FERC) rejected it. Neighbouring utilities (“DISCos”), Exelon and American Electric Power, had argued that letting a huge private user plug in behind the plant’s meter could shift as much as $140 million a year in transmission costs onto ordinary ratepayers. The principle FERC laid down is simple: a large load cannot take its primary power in private while treating the public grid as a free backup. Talen disagreed but had to restructure to supply Amazon with roughly 1.9 GW through the DISCOs until 2042, setting a precedent for how large loads interconnect despite co-located generation.

For Nigerian regulators, that ruling is practically a policy roadmap:
Fair wheeling and ancillary charges. Large users such as industrial parks and data centres that contract directly with GenCos must pay cost-reflective wheeling tariffs to the Transmission Company of Nigeria (TCN), so the wires that carry their power are maintained.

Standby capacity contributions. Captive users who rely on the grid when their own generators fail must pay structured standby fees, so the cost of their insurance is not passed on to everyday consumers.

The endgame: Upgraded transmission and an eventual spot narket
Nigeria’s reforms cannot end at a patchwork of bilateral contracts and regional pockets. The destination has to be a liquid wholesale electricity spot market: a transparent pool where every licensed generator, from Kainji hydro to the gas plants of the Niger Delta to the solar farms of the north, bids into the national grid, is dispatched in order of cost, and where prices are discovered in real time.

But no spot market has ever worked on top of a broken grid. Competition needs power to move freely, without transmission bottlenecks turning each region into a small monopoly. That makes fixing the Transmission Company of Nigeria (TCN) the non-negotiable heart of reform. But you cannot fix what you don’t measure. Which is why Mr Tegbe’s transmission audit is crucial before heavy investments are made in Transmission lines that go nowhere. But beyond that, TCN needs to be fully unbundled into the Transmission Service Provider and Independent System Operator (NISO).

These successor organisations, similar to Andhra Pradesh, must commit to the unglamorous work of commercial discipline: competitive recruitment, transparent performance tracking for staff, heavy investment in feeder metering, and attracting long-term capital to clear the wheeling bottlenecks. This is the price of admission to spot competition.

Policy recommendations for the road ahead
There are reform dimension, strategic imperative and Execution risk to avoid. For a market structure, there must be a phase out NBET’s single-buyer role in an orderly way, in favour of bilateral PPAs between GenCos and solvent off-takers. Dropping take-or-pay structures before contract enforcement and credit dispute mechanisms are mature enough to replace them.

For distribution turnaround , fix the inside of the DisCos first: audited accounts, prosecutions for power theft, and mandatory feeder-level smart metering. Betting on ownership changes alone while leaving unmetered customers and defective loss figures untouched (the Odisha mistake).

On Industrial load and captive power, give captive heavy loads (e.g., Dangote, industrial zones) a reason to return to the grid through competitive wheeling arrangements. Letting large loads use the grid purely as backup without paying fair transmission and standby capacity fees (the Susquehanna lesson).

For decentralised systems, scale productive-use renewable mini-grids for rural agro-processing hubs, guided by clear spatial master plans. Building isolated mini-grids that cannot connect to anything else and become stranded once the state or national grid arrives.

On transmission and spot market, unbundle TCN into an independent ISO and TSP with strong commercial discipline; and run transparent merit-order economic dispatch. Launching complex spot trading platforms before wheeling bottlenecks and market illiquidity are fixed.

Nigeria’s power reform is not a matter of ideology. It is economic engineering.’

We must learn from ours and other countries’ failures, and focus on what works: prioritise operational governance over ownership debates, and balance private initiative with the public grid’s survival.

The certainty of 1990 was that markets would do the work on their own. The lesson of the thirty years of this failed experiment is that markets only do the work that institutions have prepared for them.

Dr Oluwatola is an energy economist and infrastructure developer. He is a partner at AP3 Advisory and CEO at TAO Technologies. He wrote from Abuja.