When Nigeria embarked on economic liberalisation in the late 1990s and early 2000s, the telecommunications industry emerged as the flagship of reform. Within a decade, mobile penetration soared from under one percent to more than 87 percent, transforming commerce, finance and social interaction.
Yet, two decades on, attempts to replicate that success in the electricity sector have faltered, leaving Africa’s largest economy mired in chronic blackouts, diesel reliance, and irregular power supply.
The paradox has become starker as successive governments tout privatisation and liberalisation as panaceas to the problems in the sector. While telecom demonstrated how private capital and competition can spur infrastructure growth, the power sector remains bogged down by inefficiencies, debts, and policy contradictions.
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A reform that never delivered
In 2013, Nigeria unbundled and privatised its state-owned Power Holding Company of Nigeria (PHCN), selling generation and distribution assets to private investors, with the promise of ushering in efficiency and capital inflows.
At the time, optimism was high. The reform blueprint projected that Nigeria would generate 40,000 megawatts (MW) of electricity by 2020, up from about 4,000 MW in 2013. Today, available generation still hovers between 4,500 MW and 5,000 MW, barely enough for Lagos State alone. For a population exceeding 200 million, the gap is glaring.
“From gas availability, pricing, and metering to delayed payments limiting cash flow for operating and capex investment, there is a myriad of problems without the country’s economic manager being deliberate and intentional in solving them,” Jide Pratt, country manager of Trade Grid, said. “To a large extent, Nigeria is still far away from solving its power problems.”
Why telecoms worked and power didn’t
The split between power and telecom reforms lies in their structural differences. Telecommunications offered a relatively clean slate, characterised by limited legacy infrastructure, pent-up demand, and technologies that enabled private operators to scale quickly without relying heavily on government-controlled inputs. Nigerians were willing to pay upfront for SIM cards, recharge cards, and services, creating a cash-driven, demand-led model.
By contrast, the electricity market is deeply enmeshed in legacy assets, fuel supply constraints, and pricing distortions. Power generation depends heavily on natural gas, where supply is often disrupted by vandalism, unpaid debts, and policy disputes over pricing. Distribution companies (DisCos) face widespread energy theft, poor metering, and regulated tariffs that prevent cost recovery. The Transmission Company (TCN), still state-run, is a bottleneck between generation and distribution.
“The telecoms sector benefited from transparent rules, independent regulation, and investor confidence. In power, the rules keep shifting, regulators are weak, and the government still interferes heavily,” Aisha Mohammed, an energy analyst at the Lagos-based Centre for Development Studies, said.
Broken value chain
The Nigeria’s electricity value chain is riddled with dysfunction. Generating companies (GenCos) produce more power than can be evacuated due to transmission limits. Transmission, in turn, cannot deliver enough to distribution companies. DisCos often reject loads they cannot sell profitably because tariffs are below cost and consumers resist payment.
This mismatch creates a liquidity crisis: GenCos are owed by DisCos, DisCos are unable to pay because many customers bypass meters, and the government intervenes with subsidies and bailouts. According to industry estimates, the sector has accumulated over N2 trillion in market shortfalls since privatisation.
“The cash flow gap is a cancer in the system. Without fixing tariffs and payments, no serious investor will put new money into power,” Mohammed said.
Political economy of electricity
Electricity reform in Nigeria is not only technical, it is political. Unlike telecoms, where consumers willingly pay for airtime, power tariffs touch sensitive nerves. Many Nigerians, accustomed to decades of erratic supply, see high tariffs as unjustified. Governments, wary of social backlash, often freeze or reverse tariff adjustments.
The problem worsen at every election cycle. Politicians promise cheap or free electricity, undermining the market’s credibility. Even after the introduction of a ‘service-based tariff’ in 2020, which linked higher charges to improved supply, implementation has been uneven.
“There is a fundamental unwillingness to tell Nigerians the truth – that cost-reflective tariffs are the only path to sustainability,” said an executive at a leading distribution company. “Instead, we live in a cycle of subsidies and shortfalls.”
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Foreign investors disappointed
The telecoms revolution attracted global players like MTN, Econet (now Airtel), and Etisalat (later 9mobile), who saw Nigeria as a growth frontier. In power, many early investors have been disappointed.
Several DisCos have been technically insolvent for years, prompting regulators to revoke or take over licences. International financiers such as the World Bank and African Development Bank have extended billions in loans, but impact remains limited.
Diesel, solar fill the gap
Meanwhile, Nigerians have turned to self-generation. The World Bank estimates that Nigerian households and businesses spend over $14 billion annually on diesel and petrol generators. Small solar and battery systems are also growing, with companies like Lumos, Daystar Power, and Arnergy tapping into demand for reliable off-grid solutions.
But this decentralised coping strategy carries its own costs: high fuel imports, air pollution, and economic inefficiency. Manufacturers say electricity accounts for up to 40 percent of operating costs, eroding competitiveness.
Can reforms still succeed?
Despite the bleak outlook, experts insist that Nigeria can still replicate its telecoms success in power, if it addresses structural bottlenecks head-on.
Key reforms include making tariffs fully cost-reflective, restructuring DisCos to attract credible operators, investing in transmission, and liberalising the gas market. Decentralisation could also play a role: the 2023 State Electricity Act now allows states to generate and distribute electricity, potentially spurring regional solutions. Lagos, Rivers, and Kano are already exploring independent power projects.
“Nigeria’s electricity future depends on the capacity of our states to lead with vision, clarity, and technical precision. Through the workshop series, we are equipping states not just with knowledge, but with the confidence to take charge of their electricity markets,” said Chijioke Chuku, director, Legal/head of Power Desk at Nigerian Governors’ Forum (NGF).
As at June 2026, 12 States (Enugu, Ekiti, Ondo, Imo, Oyo, Edo, Kogi, Plateau, Ogun, Ebonyi, Taraba, Delta, Lagos, Nassarawa, Jigawa and Bayelsa) had enacted their electricity Acts.
Out of these 12, nine states have officially notified the National Electricity Regulatory Commission (NERC), and the transition arrangements are underway, with three of these fully taking charge of their state electricity markets. These are Enugu, Ekiti and Ondo.
States like Abia and Akwa Ibom have also just recently completed their state electricity Acts and are planning to establish vibrant markets to meet the rising demands from consumers for reliable, affordable and stable electricity.
“For the reforms in the sector to succeed, financing is key. Public finance alone will not solve the sector’s challenges, hence leveraging private sector capital is crucial,” said Geoffrey Omedo, technical specialist, Climate and Energy Finance, UNDP Nigeria, in a note.
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A big step forward is the creation of the Nigerian Independent System Operator (NISO), which separates system operations from transmission. This means the TCN can now focus solely on managing the physical infrastructure, while NISO takes charge of running the power system more efficiently and at the right standards. These reforms are boosting industry confidence and setting the stage for a stronger, cleaner energy future.
The cost of inaction
For now, the cost of failure is immense. Nigeria’s per capita electricity consumption is about 150 kilowatt-hours (kWh) annually, among the lowest in the world and a fraction of South Africa’s 3,500 kWh. The International Monetary Fund (IMF) estimates that power shortages shave at least two percent off Nigeria’s GDP annually.
In communities across the country, darkness remains a daily reality. For students who study using kerosene lamps, traders who close early, and factories that shut down production lines, the promise of reform remains unfulfilled.
“The tragedy is not that reforms failed once, but that we keep repeating the same mistakes,” said an energy economist at the University of Lagos. “Nigeria proved with telecoms that reform is possible. The question is whether we have the political will to do the same for power.”
