Olu Verheijen, special adviser to President Bola Tinubu on energy, says electricity companies need capital investment and restructuring to improve supply.
Speaking in an interview with Bloomberg on Thursday, Verheijen said distribution companies (DisCos) are short of N2 trillion in capital and need new investors to revive the industry.
According to Verheijen, companies are over-leveraged and under-capitalised, which has limited their capacity to invest in the distribution of electricity to households.
She said inadequate pricing, patchy revenue collection and a dilapidated national grid have left most residents in Africa’s most populated nation to produce their power using generators.
“We need to set policies that facilitate reorganization and recapitalisation and bring in new partners with new capital,” Verheijen said.
“The recapitalisation will accompany plans to make electricity tariffs cost-reflective, which will improve the liquidity and viability of the power sector.”
Verheijen said with no tariff review, a weak naira as well as increasing inflation could push energy subsidies to N1.6 trillion.
“With the current tight fiscal space, government’s ability to cover this shortfall is challenged,” Verheijen added.
“These issues have exacerbated the financial-liquidity challenges in the sector.”
In December 2023, the Nigeria Electricity Regulatory Commission (NERC) said the government incurred a subsidy obligation of N204.59 billion in the third quarter (Q3) of 2023.
Meanwhile, the Transmission Company of Nigeria (TCN) said the country currently has the capacity to transmit 8,100 megawatts (MW) of about 13,000 megawatts (MW) generated electricity.
TCN said Nigeria is supposed to transmit about 15,000MW but cannot meet this capacity due to weak and ageing infrastructure.