Nigeria Eyes $2.9 Billion Debt Raise to End Power Shortages

Diesel generators at a market in Lagos, Nigeria. Photo by Benson Ibeabuchi /Photographer: Benson Ibeabuchi/B

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(Bloomberg) — Nigeria plans to raise 4 trillion naira ($2.9 billion) from its domestic capital markets to settle outstanding debts owed to power companies as it seeks to end perennial blackouts in the West African nation. 

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The first tranche of debt, totaling 501 billion naira, was issued earlier this month at a 17% yield and was fully subscribed, Olu Verheijen, President Bola Tinubu’s special adviser on energy, said in an interview. The balance will be issued each quarter or every six months, depending on market conditions, she said.

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“The program represents a decisive reset of the electricity market,” Verheijen said, clearing legacy payment arrears owed to power-generation companies dating back a decade to build a sustainable market. 

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Africa’s most-populous nation endures chronic power shortages, with the grid supplying only about 4,000 megawatts to more than 230 million people, just over half of whom are connected. By comparison, South Africa, with about a quarter of Nigeria’s population, has more than 10 times its generation capacity.

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Poor metering, high collection losses, aging infrastructure and a government energy-subsidy initiative have saddled the sector with a heavy debt overhang. 

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The inadequate power supply has pushed many companies off the grid, with self-generated electricity accounting for nearly half of consumption, an increasing share of it from solar panels. 

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Verheijen said some of the funds raised will help electricity distribution companies close the metering gap to improve revenue collection. Money will also be allocated to upgrade transmission infrastructure. 

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Only about half of grid-connected customers are metered, and the transmission network can wheel just a quarter of the country’s estimated 13,000 megawatts of available generating capacity.

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The government expects the debt settlement to free up 4,484 megawatts of generation capacity and stabilize power supply for about 12 million registered customers, it said in an emailed statement. It is also adopting a more price-led electricity market.

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“We have commenced a transition to a market-reflective tariff,” Verheijen said. “What we are going to do is clear a pathway to a consumption-based tariff framework so that what you pay for is what you consume.”

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—With assistance from Emele Onu.

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