March 25, 2025
Nigeria’s power sector has long been plagued by inefficiencies, poor electrification rates, as well as chronic power outages and shortages. Despite being Africa’s largest economy, access to stable and reliable electricity remains a major constraint to industrial growth and economic development. Based on data from Nigerian Electricity Regulatory Commission (NERC), Nigeria’s installed power generation capacity is currently about 13,625 MW but the operational output was only reported to be c.5,339MW recently. Thus, the power sector continues to lag behind in meeting the nation’s energy demands.
One of the most effective strategies to overcome these challenges is digitalisation. Digital technologies have been pivotal in revolutionising power sectors across the world, enhancing efficiency, and ensuring sustainability. As a matter of fact, the United Arab Emirates (UAE) stands out as an example of how a country can leverage digitalisation to build a robust, efficient, and smart power infrastructure.
In this article, we review the current challenges in Nigeria’s power sector, the achievements so far, and propose the adoption of digital models in enhancing Nigeria’ power sector.
- Challenges of the Nigerian Power Sector Nigeria’s grid infrastructure is largely inefficient, operating at an average of only about 40% of its capacity, forcing millions to turn to costly and non-ecofriendly diesel generators. A significant portion of power generation and distribution infrastructure of the country is outdated leading to frequent power outages. The grid failures, which happen frequently, are a severe handicap on industrial production, business activities and day-to-day life of the citizens. The challenge of vandalism of power infrastructure, which is yet to be fully addressed has also been a huge cog in the wheel for reliable supply of electricity. Intentional destruction of transmission lines, substations and distribution networks have caused many interruptions in service leading to high costs of repairs. Such vandalism affects service delivery and only adds to the financial burden on power companies further undermining the stability of an already fragile system. Thermal plants fired by gas provide more than 75% of Nigeria’s energy while renewable energy sources are mostly untapped, when in fact, the country has a great potential in solar, wind and hydropower energy sources. These burning issues all point to the need for an urgent overhaul of the energy sector.
- Recent Achievements in Nigeria’s Power Sector: Nigeria’s power sector has recently experienced some improvements aimed at enhancing electricity generation, distribution, and access. Some of these achievements include:i. Record Power Generation Levels On 2 March 2025, it was reported that Nigeria achieved a milestone by reaching an available power generation capacity of 6,003 megawatts (MW), the highest in the nation’s history. This was accompanied by a peak generation evacuation of 5,801.84 MW and a daily maximum energy output of 128,370.75 megawatt-hours (MWh). These figures indicate progress in addressing the country’s electricity demands; though, major blackouts due to infrastructure inadequacies were reported few days after this report.
ii. Strategic Structural Reforms In 2024, the Electricity Act 2023 was introduced, replacing the previous Electricity and Power Sector Reform Act of 2005. This new legislation decentralises the generation, transmission, and distribution of electricity, empowering sub-nationals and promoting a more efficient and responsive power sector. While the benefits are expected to materialise over the medium to long term, this reform lays the groundwork for substantial improvements.
iii. Embracing Renewable Energy Initiatives Nigeria secured a $200 million agreement with WeLight, a pan-African Distributed Renewable Energy company, to install hundreds of renewable mini-grids. This initiative is aimed at providing reliable electricity to millions in rural and sub-urban areas, increasing the share of renewable energy in Nigeria’s electricity mix. The project is supported by the World Bank and the African Development Bank, and it is expected to enhance electricity access for an estimated 1.5 to 2 million people, stimulating local economies.
iv. Anticipated Market-Driven Efficiencies Futuristically, structural reforms and market-driven efficiencies are expected to reshape Nigeria’s power sector in 2025 and beyond. For instance, the recent revolutionary Order for the transition to bilateral trading in the Nigerian Electricity Supply Industry to a more decentralised structure that encourages bilateral trading between generation companies (GenCos) and distribution companies (“DisCos”) has been celebrated by many stakeholders. Based on the Order, the Nigerian Bulk Electricity Trading Company Plc (NBET) will continue to play a crucial role (in respect of its existing contracts) in the take or pay model by acting as a financial intermediary, managing capacity, mitigating risks, enforcing market discipline, ensuring regulatory compliance, and facilitating revenue allocation. These developments signify a concerted effort by Nigeria to overcome longstanding challenges in its power sector, aiming for a more reliable, efficient, and sustainable electricity supply for its populace. Called From BusinessDay