Key Challenges and Opportunities in the Nigeria Energy Sector

From energypedia

This article is written by Charlotte Remteng, Muhammad Bello Suleiman, Chiamaka Maureen Asoegwu and Chysom Nnaemeka Emenyonu as part of the requirements for the Open Africa Power Fellowship Programme 2021. It is a sub-section of the publication, Country Project Nigeria.

Nigeria Energy Situation

Key Challenges

The following are some challenges in Nigeria’s energy sector;

The Nigerian power sector experiences many broad challenges related to electricity policy enforcement, regulatory uncertainty, gas supply, transmission system constraints, and major power sector. A recent study of the Nigerian energy sector (GIZ 2015) observed that the national grid is characterized by a poor voltage profile of the network and constrained by limited control infrastructure. Overloaded transmission lines and high technical and non-technical losses are regular features. It is evident available generated power falls short of the load demand in Nigeria primarily due to ever-increasing energy demand resulting from an increasing population; this is a clarion call for diversification into other forms of renewable energy sources to alleviate the inadequacies of power generation

Despite the transformations in the power sector, the Transmission and Distribution (T&D) sector is still laden with several challenges ranging from limited transmission capacity of 6000MW, high technical and non–technical losses power losses, vandalism and needless power theft, corruption in power management, ineffective distribution planning method (no redundancy), inaccurate metering system, inadequate, old and dilapidating T&D infrastructure, Poor voltage stability, Inadequate coverage, aged and inadequately trained personnel, Radial Transmission Lines with insufficient redundancies to meet up with N-1 contingency criterion. In summary, the major problems identified are:

-       It is funded solely by the Federal government whose resource allocation cannot adequately meet all the requirements;

-       It is yet to cover many parts of the country

-        Some sections of the grid are outdated with inadequate redundancies as opposed to the required mesh arrangement;

-       The Federal government lack the required fund to regular expand, update, modernize and maintain the network;

-       There is regular vandalization of the lines, associated with a low level of surveillance and security on all electrical infrastructure;

-       The technologies used generally deliver very poor voltage stability and profiles;

-       The transformers deployed are overloaded in most service areas;

-       Inadequate of spare parts for urgent maintenance; and

The distribution system is also confronted with a multitude of problems. Access to the grid presently stands at only 40% of the population. Even the available electricity capacity is insufficient to meet the existing power needs of less than 40% who have access to the national grid. electricity demand is presently far more than the generation and the transmission

-       Poor utilization of existing assets and deferred maintenance;

-       Delays in the implementation of new projects;

-       Lack of sustained, sound, and the practicable relationship between the Federal Government and other stakeholders particularly the JV international oil companies and the Independent Power Producers (IPP).

Further Information


Table 11: Opportunities in the Generation Sub-sector

Type Features Regulation
1. Captive Generation -       Off-Grid

-       Power Consumed by Generating entity

-       > 1MW

-       No Distribution Infrastructure is required

-       Permit required from NERC

NERC Captive Power Generation Regulation
2. Embedded Generation -       Plant directly connected to the distribution network.

-       > 1MW

-       Power sold directly to DisCo through bilateral contract.

-       Licence required from NERC

-       Good for a cluster of customers e.g. Industrial Estates

NERC Regulation on Embedded Generation
3. IPP Off-grid -       Plant is not connected to the national grid.

-       Power is sold to an off-taker (Commercial or residential) through a bilateral contract.

-       Good for a cluster of customers e.g. Housing estates, industrial customers, large installations of telco equipment

-       There may be a need to invest in distribution infrastructure

-       Requires Licence from NERC

4. IPP On-grid -       Generation plant is connected to the grid

-       Power is evacuated to the National grid.

-       Suitable for large scale projects

-       Requires PPA with the Bulk Trader (NBET)

-       Subject to capacity need & system constraints.

-       Requires a license from NERC

NERC Generation Procurement Regulations.
5. Embedded Independent Electricity Distribution Network (IEDN) -       For areas where there is presently no distribution network.

-       Will connect to existing DisCo to be able to distribute power

-       Possibility of ring-fencing a section of willing paying customers of a DisCo

-       DisCo will be responsible for the installation and management of electricity meters

6. Rural Off-Grid (IEDN) -       Isolated IEDN in a rural area not connected to any licensed distribution or transmission network.

-       Rural area is defined as an area

o   Situated over 10KM from the boundaries of an urban area or city

o   With less than 20,000 inhabitants

o   At least 20KM away from the nearest existing 11KV line.

-       Will require to purchase power from a Generating Company through bilateral contract.

-       Can seek financial support from the Rural Electrification Fund (which at present is non-operational).

-       Requires a license from NERC

7. Urban Off-Grid IEDN -       IEDN in an urban area but not connected to any licensed Transmission network

-       Separate tariffs to be approved by NERC

-       Electricity Meters installation and management responsibility of the investor

-       Requires License from NERC



Investment Opportunities in the Transmission network

The transmission network system requires a significant amount of investment for expansion of wheeling capacity, improving reliability, stability and reducing transmission losses.

The Private Sector investment will be required in the following areas to achieve the goals of the electric power reform program of the government. Transmission Network expansion;

-       Dualization of critical lines to create redundancy;

-       Relief for congested segments of the grid;

-       Replacement of old & broken down lines & equipment

-       Modern asset management & operational processes

-       Efficient Project management practices

-       Vegetation management;

-       Human capacity development

-       Local manufacture of components.

-       Implementation of the Super Grid concept (approx. cost of $5bn)

Nigeria’s Nationally Determined Contributions (NDCs)

Nigeria's Intended Nationally Determined Contributions (NDCs) aim to ensure economic and social development by growing the economy at 5 percent a year, improving the standard of living, and ensuring access to electricity for all;

⮚    Work towards ending gas flaring by 2030.

⮚    Work towards off-grid solar PV of 13GW (13,000 MW).

⮚    Promote the use of efficient gas generators.

⮚    Increase energy efficiency by 2 percent per year (30 percent by 2030).

⮚    Promote transport shift from private cars to public buses.

⮚    Improve and modernize the electricity grid.

⮚    Implement economy-wide energy efficiency.

⮚    Build efficient gas power stations.

⮚    Adopt and disseminate a climate-smart agriculture.

⮚    Reduce transmission losses.

⮚    Promote the use of renewable energy


Improved power sector management and governance would help to reduce outages and transmission losses. Failure to do so would impede industrial growth and would mean continued high levels of use of polluting backup generation. Reducing bioenergy use across all sectors would bring several benefits, not least because its use is strongly linked to deforestation and air pollution (IEA, 2019)