Why Power Reforms Keep Failing Nigeria’s Economy
By NINI NDUONOFIT-AKOH
DESPITE decades of reforms, massive public spending, and repeated assurances of progress, Nigeria’s power sector remains stuck in chronic underperformance, failing to deliver reliable electricity to homes and businesses.
Each reform phase promised stable supply, lower tariffs, and improved productivity. Instead, the national grid continues to suffer frequent collapses, fragile infrastructure, and deep structural weaknesses that undermine Africa’s largest economy. Electricity, a core driver of industrialisation and competitiveness, has become one of Nigeria’s most persistent economic bottlenecks.
Data from the Central Bank of Nigeria’s Business Expectations Survey highlights the severity of the crisis, ranking unreliable power supply as the third most serious constraint facing businesses, after insecurity and taxation. This ranking underscores how little has changed despite years of intervention.
The instability of the national grid sits at the heart of the problem. Power generation is inconsistent, transmission capacity is limited, and voltage fluctuations regularly damage equipment. Manufacturers, service providers, and small businesses factor electricity uncertainty into their operations, discouraging expansion and long-term investment.
In response, households and firms have increasingly turned to alternative energy sources. Diesel and petrol generators remain widespread, while solar and inverter systems are gaining ground. However, these solutions merely shift the burden of electricity provision to consumers.
Generator reliance exposes businesses to volatile fuel prices, especially following downstream deregulation, while maintenance and spare parts inflate costs further. The environmental and health consequences—noise, pollution, and carbon emissions—add to the toll. Solar and inverter systems, though cleaner, require heavy upfront investment, placing them beyond the reach of many small and medium-sized enterprises.
These coping mechanisms mask deeper structural failures. Gas supply shortages limit generation, while liquidity constraints across the value chain hinder maintenance and upgrades. Transmission bottlenecks prevent power delivery even when generation improves, and distribution inefficiencies are worsened by energy theft, poor metering, and weak consumer trust.
Regulatory data from Q3 2025 reveals persistent financial strain. Distribution companies billed ₦706.6 billion out of ₦854.5 billion in energy offtake, achieving an 82.7 percent billing efficiency. However, only ₦570.3 billion was collected, leaving a substantial revenue gap that continues to destabilise the sector.
Metering remains a critical challenge. Just 55.4 percent of registered customers were metered by Q3 2025, fuelling disputes over estimated billing and weakening payment discipline. Low confidence in service quality further discourages consumers from paying, perpetuating a vicious cycle of poor revenue and deteriorating infrastructure.
The Electricity Act 2023 offers a potential turning point by decentralising the sector and empowering states to generate and distribute power. Yet without addressing gas supply, metering gaps, transmission weaknesses, and financial discipline, the reform risks reproducing old failures at a new level.
Until execution matches ambition, Nigeria’s power paradox—billions spent with little to show—will endure.
