CNBC Report
Key Points:
- George Etomi said liquidity risk remains the biggest threat to Nigeria’s power sector, followed by technical and capacity constraints.
- Nigeria’s transmission capacity remains around 4,000 to 5,000 megawatts, largely unchanged 13 years after privatization.
- Installed generation capacity has risen from about 7,000 megawatts to roughly 13,000 to 15,000 megawatts.
- A major challenge is evacuating generated power through the grid and delivering it to end users.
- The federal government has introduced a 501 billion naira power bond to help address sector debts and liquidity problems.
- Etomi said legacy liabilities remain unresolved and may require a more direct government intervention.
- Gas producers could reduce domestic supply if payment issues remain unresolved and exports offer better economics.
- Distribution network modernization is essential to improve collections and reduce the liquidity crisis.
- Etomi argued that cost-reflective tariffs are necessary, though consumers need to understand their total energy spend across all sources.
- Mini-grids, solar, battery services, biomass and embedded generation could help expand access and reduce pressure on the central grid.
- International investors, including renewable-focused groups from California, are showing interest in Nigeria and the wider African energy market.
- A predictable investment climate and progressive reform execution will be key to attracting private capital in the next phase.
Nigeria’s power sector remains under severe strain, with liquidity pressures, weak transmission infrastructure and persistent market distortions continuing to undermine progress more than a decade after privatization, according to George Etomi, founder of George Etomi and Partners.
Speaking in a TV interview from Lagos, Etomi said the first quarter reinforced a familiar diagnosis for the industry: the biggest threat is still liquidity, followed closely by capacity constraints in moving electricity across the network and ultimately delivering it to paying customers.
His assessment comes as Nigerian authorities push a series of reforms aimed at restoring liquidity, improving the bankability of the market and creating a more predictable investment climate. Those measures include a 501 billion naira power bond and the introduction of a grid asset management company, or GAMCO, as the government seeks to address longstanding structural weaknesses in the electricity value chain.
Etomi said the broad picture remains troubling. Thirteen years after power sector privatization, Nigeria’s transmission capacity is still hovering at roughly 4,000 to 5,000 megawatts, little changed from where it stood at the time of the handover. By contrast, installed generation capacity has expanded significantly, rising from around 7,000 megawatts to roughly 13,000 to 15,000 megawatts.
That imbalance, he argued, lies at the heart of the current crisis.
“Nigeria has increased its ability to generate power, but the real problem is how to evacuate all of that power to consumers,” Etomi said. “If that electricity can get to end users, it would make a huge difference.”
The sector’s financial stress is being compounded by wider pressures in energy markets, including gas supply constraints. Since much of Nigeria’s grid electricity depends on gas-fired generation, disruptions in upstream fuel availability have had a direct impact on power output and costs. Etomi noted that domestic energy assets are tied to global energy pricing dynamics, which means suppliers are often incentivized to sell into international markets rather than remain exposed to payment uncertainty at home.
That is particularly significant in the context of unpaid debts across the electricity chain. Generating companies are owed money, gas producers are owed by generators, and disputes continue over the size of legacy obligations. While the federal government has moved to raise 501 billion naira through a power bond, Etomi said the intervention may not fully resolve the issue because the liabilities continue to grow and market participants disagree on the true amount outstanding.
The government has put part of the shortfall at around 2.8 trillion naira, but operators have indicated that figure may not fully address accumulated debts for energy already supplied. Gas producers, in turn, are watching closely. If the payment framework does not improve, they may have little reason to commit additional gas to the domestic power market.
Etomi said Abuja may need to take a more direct position on these legacy liabilities rather than allowing uncertainty to linger.
“The federal government should just accept that it is a legacy issue and deal with it,” he said, adding that future reforms must focus on ensuring more power is transmitted and distributed efficiently so that sector revenues improve at the consumer end.
That points to another bottleneck: distribution. Even if transmission is upgraded, Etomi said distribution companies must also modernize their networks to absorb and deliver additional supply. Without stronger recovery from consumers, liquidity will remain weak and investor confidence will stay fragile.
Nigeria’s electricity market has long struggled with non-cost-reflective tariffs, low collections and widespread energy theft, including meter bypassing. Etomi argued that tariff reform remains unavoidable, even if it is politically difficult. In his view, consumers may pay more for grid electricity in a reformed market, but their total energy spend could decline if they rely less on diesel, petrol generators and other backup sources.
He said a key challenge for policymakers is securing public buy-in by framing electricity costs in terms of total household and business energy expenditure, rather than focusing narrowly on utility bills.
For investors, the path forward will depend not just on tariff clarity, but also on a broader sense that Nigeria is committed to stable rules and credible implementation. Etomi said reform should be approached progressively, drawing lessons from sectors such as telecoms and banking, where gradual but sustained improvements helped unlock growth.
He also argued that Nigeria should segment its electricity strategy. For rural and underserved communities, decentralized systems such as mini-grids and solar solutions will be critical. Those models are already emerging, though more slowly than many in the industry would like. He pointed as well to battery-as-a-service business models and said biomass remains an underdeveloped opportunity, particularly given Nigeria’s waste profile.
Distribution companies could also diversify their supply mix through embedded generation, reducing sole dependence on central grid power and improving reliability for customers, he said.
On affordability, Etomi acknowledged that solar systems remain expensive for many Nigerians, with costs often running from hundreds of thousands to more than one million naira. Even so, he argued that many households already pay heavily for fragmented energy access through a mix of solar, petrol and grid supply, without fully calculating the cumulative cost.
“The lesson here is that government must play its part, citizens must play theirs, and investors will respond to the right climate,” he said.
Despite the challenges, Etomi struck an optimistic note on Nigeria’s medium-term prospects, particularly in renewables. He said his firm has been actively engaged with international partners, including a California delegation that explored renewable energy opportunities in Nigeria last year. He is also expected to participate in an upcoming conference in San Francisco focused on renewable investments across Africa, including in Kenya, Ghana and Nigeria.
That interest, he suggested, is evidence that international capital is still watching the market closely. But converting that interest into transactions will require Nigeria to tackle the fundamentals: settle legacy debts, improve tariff realism, upgrade transmission and distribution, and create an investment environment that is both transparent and predictable.
Until then, the country’s power sector may continue to generate more potential than it can deliver