Nigeria loses $26bn yearly to electricity shortage –Report

• Nigeria loses $26 billion yearly to electricity shortage
• To make up for the shortage, businesses spend nearly $22 billion on off-grid fuel
• The report highlights the need for Nigeria to diversify its energy sources

A report, Africa Trade Barometer, by the Standard Bank, notes that Nigeria suffers an estimated annual economic loss of $26 billion due to electricity shortages.

According to the report, businesses shore up electricity shortages by spending nearly $22 billion annually on off-grid fuel, which leads to increased operational costs.

The report noted that electricity shortage, often caused by the frequent collapse of the national grid, is a major challenge faced by businesses in Nigeria and some other African countries.

“In Nigeria, surveyed businesses must contend with a national grid that frequently collapses as it fails to meet a daily peak demand which is nearly four times its generation capacity. Economic losses arising from Nigeria’s electricity shortages are estimated to be $26 billion annually, without accounting for spending on fuel for off-grid generators, which is estimated to be a further $22 billion.

“Across the 10 African markets, power supply infrastructure remains the most severe obstacle to surveyed businesses’ operations. It is reported as one of the most poorly perceived infrastructural attributes as well as the one presenting the most severe obstacle to business operations.

“Blackouts cause a downtime of production, risk the quality of goods that require controlled environments, impact water supply, and affect telecommunications infrastructure which businesses may rely on for payments. The result is reduced sales and income,” the report noted.

Need for diversification of energy sources

The report also highlighted the need to diversify energy sources to avoid the risks posed by over-reliance on the national grid. It said policies are crucial to stabilising the country’s electricity generation and attracting investment into renewable energy.

Recall that the Minister of Power, Adebayo Adelabu, said Nigeria aims to achieve 6,000 megawatts (MW) of power by year-end through a combination of hydroelectric and gas-fired power plants and targets to generate, transmit and distribute 30 gigawatts (GW) by 2030, 30 per cent of which will be renewable energy.

Adelabu also said power generation under President Bola Tinubu’s administration increased from four MW to 5,170 MW within a year of being in office. 

Nigeria has borrowed about 10 loans in the last decade to address power sector challenges. This trend has continued in President Tinubu’s administration with the President securing loans towards the power sector from the World Bank, the African Development Bank, among others.

Power sector funding hasn’t improved electricity supply

Despite the huge funds Nigeria’s power sector has gulped, the sector still suffers such challenges as underinvestment, poor and outdated infrastructure and inadequate funding. This has led to shortages in electricity supply, especially with the incessant collapse of the national grid.

In 10 years, the grid has collapsed 105 times, 93 times under President Muhammadu Buhari and 12 times in just 16 months of President Bola Tinubu’s administration. In 2024 alone, it has collapsed about nine times, the recent ones being three consecutive times of collapse within one week on October 14, 15 and 19.

Increased bill collection efficiency rate pushes DisCos’ revenue to N168.7bn in August

Meanwhile, TheRadar reported that the Nigeria Electricity Regulatory Commission (NERC) says electricity distribution companies (DisCos) in Nigeria received a combined revenue of N168.7 billion in August 2024.

According to a fact sheet released by the NERC for August 2024, DisCos billed customers a total of N208.5 billion, while N168.7 billion was received, which represents a collection efficiency rate of 80.91 per cent.