Power sector: Nigeria needs about $10bn investment to address challenges

Nigeria's power sector is at a critical juncture, with the Minister of Power, Adebayo Adelabu, emphasizing the need for approximately $10 billion in investment from both foreign and local investors, as well as the Federal and State Governments. The sector is facing mounting challenges, with the government's debt to generating companies skyrocketing to 800 billion naira, in addition to a 3 trillion-naira debt. George Etomi, founder of George Etomi and Partners, sheds light on the complexities and requirements for revitalizing Nigeria's power sector. According to Etomi, the $10 billion figure mentioned by the minister is not a one-time investment, but rather an annual necessity. The sector is cash-strapped, with outdated equipment across the entire value chain, especially in transmission and distribution. To reach a target of generating and distributing around 30,000 megawatts of electricity daily, a continuous annual investment of approximately $10 billion is crucial. The investment must come from a combination of public and private sectors, including the involvement of state governments. However, the success of attracting such significant capital hinges on a robust legal and regulatory framework that instills confidence in investors. Etomi highlights the pressing need for modernizing the sector's infrastructure, from new generating capacity to upgrading transmission and distribution facilities. The challenges extend to metering, where closing the metering gap is essential to address consumer frustration and ensure accurate billing. Apart from capital requirements and infrastructure upgrades, the power sector also grapples with the issue of debt. The mounting debts owed by government parastatals, such as an outstanding $200 billion to generating companies monthly, pose a substantial obstacle to investor confidence. Etomi emphasizes the importance of a clear legal and regulatory framework to provide certainty to investors and ensure a viable return on investment. Addressing the longstanding issue of MDA debts and implementing mechanisms for debt repayment will signal a commitment to fiscal responsibility and aid in fostering investor trust. Additionally, prioritizing a disciplined approach to debt settlement, particularly to gas producers, is crucial for sustained operations and financial stability in the sector. By establishing transparent communication and proactive debt management strategies, Nigeria can create an environment that incentivizes long-term investment in its power sector. In conclusion, the path to revitalizing Nigeria's power sector and attracting the necessary $10 billion investment demands a multi-faceted approach. It necessitates a harmonized effort from the government, private investors, and state entities to address infrastructure challenges, streamline regulatory frameworks, and tackle debt obligations. Only through sustained commitment to reform and strategic planning can Nigeria overcome its power sector hurdles and pave the way for a more reliable and robust energy system.