“We are implementing ‘super grid’ solutions to end frequent collapse, ensure stability”- Adelabu
“Cost-reflective tariffs, market discipline key to power sector reforms… electricity subsidy regime poorly structured” – says Olowoniyi, CTA
Oredola Adeola
The Transmission Company of Nigeria (TCN) has spent nearly N10 billion in the past six months repairing vandalized transmission lines and towers destroyed either by vandals or bandits across the country between January and November 2024.
Chief Adebayo Adelabu, Minister of Power, disclosed during his keynote speech at the PwC Roundtable themed “Reigniting Hope in Nigeria’s Electric Power Sector,” held in Lagos on Thursday.
The Minister, represented by his Chief Technical Assistant (CTA), Adedayo Olowoniyi, emphasized the government’s resolve to transform challenges into opportunities and deliver tangible progress in the power sector.
Chief Adelabu noted that funds earmarked for completing critical projects and expanding the grid had instead been diverted to repairing damaged infrastructure.
“This expenditure should have been used to complete existing projects and expand the grid,” he lamented, adding that the persistent attacks on the transmission network remain a major setback.
The Minister acknowledged that while the power sector has recorded notable achievements, challenges such as grid disturbances, aging infrastructure, resource constraints, capacity inadequacies, and recurrent vandalism continue to hamper progress.
To address these challenges, Adelabu outlined a series of short- and long-term measures.
“He said, “In the short term, TCN has reinforced standard operating procedures, developed detailed maintenance plans for key transmission substations, conducted line tracing for frequently tripping lines, replaced outdated equipment at critical stations, and assessed the integrity of key nodes to prevent further disruptions.
“For the long term, the government is finalizing plans for a “super grid project” aimed at establishing a more robust and resilient grid system.
“We believe that with these measures in place, we will achieve grid stability,” he stated, expressing optimism about the future,” he said.
The Minister further called for a collective effort to protect critical infrastructure, stressing the importance of safeguarding assets already in place.
He urged stakeholders in Nigeria’s Electricity Supply Industry (NESI) to adopt a performance-oriented approach, emphasizing the need for commercially defined electricity projects and the payment of appropriate tariffs to fund and expand infrastructure.
“We must ensure that electricity infrastructure is adequately protected, and that every project is commercially viable. Nigerians must pay the right tariffs to enjoy improved services and infrastructure,” he said.
Olowoniyi, Chief Technical Assistant (CTA) to Nigeria’s Minister of Power, on his part emphasized the urgent need for cost-reflective tariffs and strict adherence to market rules to attract investment and drive growth in the country’s electricity sector.
According to him, while there is reluctance to implement cost-reflective tariffs, they are indispensable for securing investments.
“If we do not adopt this approach, most investors looking to raise capital for power sector projects will be discouraged when they assess the Internal Rate of Return (IRR) viz-a-viz the tariff framework ” he said.
Stress the importance of securitizing revenue streams across the electricity value chain to ensure that agreements made upstream are effectively implemented downstream, he said.
“This is how market-driven tariffs are determined—by ensuring contracts are clear, revenue streams are secure, and market dynamics guide pricing decisions,” he noted.
Speaking on market competition and price discovery, Olowoniyi highlighted the lack of price discovery in the energy sector as a key obstacle. “Upstream pricing and tariffs for generating companies (GenCos) must reflect market realities, and the best way to determine this is through competition,” he stated.
Olowoniyi underscored the need for alignment between policy and regulations to enable the private sector to function effectively.
“The gap in policy implementation must be closed to create a disciplined market governed by clear rules,” he said.
“Revenue independence is the first step towards regulatory independence,” he added.
The CTA further identified poor implementation of policies and insufficient stakeholder buy-in as significant hurdles.
“While we have good policies and effective regulators, implementation and getting stakeholders to adhere to market rules and grid codes remain challenges,” Olowoniyi explained.
He noted that many participants in the NESI prefer to operate in isolation, disregarding the interconnected nature of the electricity value chain.
“When there is a gap in the system, the entire grid becomes vulnerable,” he warned, stressing that compliance with regulatory rules is essential for a robust and interconnected electricity sector.
For Nigeria’s electricity sector to achieve its full potential, Olowoniyi stressed the importance of market discipline.
“All players in the NESI must comply with regulatory rules and focus on building a disciplined market that adheres to agreed standards and processes,” he noted.
CTA to the Minister of Power, attributed inefficiencies in Nigeria’s electricity value chain to decades of suboptimal energy delivery practices.
Speaking at a recent industry forum, Olowoniyi criticized the establishment of high-capacity infrastructure, such as 330kV substations, in areas with minimal power demand. He explained that such inefficiencies, like supplying 100MW to a substation consuming only 5MW, result in a 95MW loss, which is ultimately borne by customers through higher tariffs.
Olowoniyi also labelled the country’s subsidy regime, as poorly structured and inequitable.
He noted that individuals and businesses consuming the largest volumes of electricity, and who are most capable of paying, are the primary beneficiaries of subsidies.
He argued that in a well-functioning market, subsidies should be targeted at those at the lower end of the economic value chain who face challenges in affording electricity.
According to him, the introduction of the Band A tariff system, aims to address this imbalance by ensuring that subsidies are redirected to areas with higher per capita incomes, where they are most needed.
“We must rethink our processes to ensure they align with the fundamental goal of delivering dividends to citizens,” he stated, adding that a more efficient value chain would lead to sustainable electricity pricing and a more equitable energy market.
