Nigeria is BIG. So are its electricity needs.
We all know the feeling, even panic, when the power goes out at home. Now imagine trying to run a whole country without power.
That’s the challenge of Bola Tinubu, the new president-elect of Nigeria. He faces a long list of crises: insecurity, rising frustration among the youth, slow economic growth, and chronic unemployment. None of these can be successfully tackled unless the country comes to grips with its electricity catastrophe.
A few facts to level-set:
1. Nigeria is a really big country.
Already more than 200 million people, Nigeria will pass the United States to become the world’s third largest population in about twenty years. That’s a huge demographic opportunity if the country can become an engine for dynamic growth. But if jobs aren’t created for all those young people, Nigeria could instead become a global problem.
2. People think of Nigeria as energy rich, but it’s really not.
The country is (most years) Africa’s biggest oil producer, but the US produces more than 10x as much. Per capita production is less than Denmark, Australia, or Argentina. That’s why there’s no realistic way for Nigeria to replicate the Saudi model of using oil revenues to pay for everything else a country needs. Nigeria has to grow the non-resource sectors of its economy – and that means electricity.
3. Nigeria has very few power plants (and lots of generators).
Nearly all sectors of the economy need electricity to be more productive. Yet the entire country’s installed on-grid capacity is ~12 GW on paper with less than 4 GW producing on a typical day. By comparison, the US has installed capacity over 1,200 GW (yes, 100x).
The lack of sufficient power is a primary reason why diesel generators are everywhere in Nigeria. By some estimates, generators account for more capacity in Nigeria than utility-scale plants. As Lauren Gilbert recently wrote: “Every generator is a policy failure.”
4. As a result, Nigerians use almost no electricity.
Annual consumption is just 121 kWh per person. Even if we double (or triple) that by including generator use, it’s still meager, less than even what's needed to run one American fridge.
5. The electricity problem is a massive obstacle to job creation and economic growth
It’s really hard to create jobs or run a company without reliable, cheap electricity. Nigerian manufacturing firms report an outage more than once per day and that backup generators account for a whopping 59% of their power use. Even with subsidized diesel, that means firms are paying a massive premium to keep the power on. (That’s why if you organize a meeting in Nigeria, you will likely be billed for the room, catering, etc, plus a diesel surcharge.)
So what can President-elect Tinubu do?
I’ve worked on and in Nigeria for most of my career and it’s one of my absolute favorite places. It’s also one of the most vivid examples of squandered human talent. Look no further than the creative industries (music, film, fashion, literature), which are booming in part because they are less tethered to local electricity. The highly successful Nigerian diaspora is another window into the country's massive potential once constraints like lousy power are lifted.
So what can the new government do? The challenges are too many to list here, but I’d suggest three big picture priorities:
Aim high by investing in generation but don’t forget transmission & distribution.
There’s simply no way to run a modern economy without getting electricity usage way, way up. For Nigeria to reach even a modest 1,000 kWh per person, would imply a 15x capacity increase by 2050. Building all those turbines and solar panels will require attracting more private investment which, in turn, means enabling deals with a positive rate of return.
But, in Nigeria, just building power plants won’t be enough without complementary investments in the decrepit transmission network. Private capital is available for generation if the projects are bankable; transmission will need public investment. And farther down the value chain, the distribution companies (called ‘DisCos’) were privatized a decade ago but the market is largely stuck. Opening further to competition could allow more innovation and private capital to flow.
Let off-grid and mini-grid solutions respond to the rural access gap, allowing utilities to concentrate on urban and industrial power.
Connecting everyone via the grid in Nigeria is probably impossible. And fortunately, it's not necessary. Uganda has lessons to offer here: its national utility is only responsible for urban and industrial clients, leaving rural connections to a separate entity. By no coincidence, Uganda’s Umeme is one of the very few financially solvent utilities on the continent. Luckily, Nigeria has a Rural Electrification Agency that’s trying to attract more financing for off-grid options. Clear delineation of geographic responsibilities, including where future grid expansion will go, would allow more efficient market segmentation. As my friend Kate Steel argued, “it’s grid + off-grid, not grid vs. off-grid.”
Exploit cheap utility-scale solar as much as possible, but don’t apologize for using gas backups.
Nigeria pledged to reach net zero emissions by 2060, conditional on international financial support. The national investment plan envisions 200 GW of solar, backed up by 10 GW of peaker plants to run on domestic natural gas. Donors are excited about solar, but are balking at the gas backups. To the President-elect, I offer this chart to provide some perspective:
