Power & Utilities
An advisory briefing on Nigeria's power and utilities sector: why substantial installed capacity still yields chronic grid unreliability, how partial tariff reform and Electricity Act 2023 decentralisation are reshaping the market, and what the migration toward state, captive and off-grid power means for boards, investors and lenders. Not yet approved for publication; all figures are point-in-time and require re-verification before publication.
Nigeria's electricity sector presents boards, investors and lenders with a defining contradiction: substantial installed capacity that the system cannot reliably deliver. NERC's April 2026 Operational Performance Factsheet showed grid-connected installed capacity of 13,625 MW, with average available capacity of about 4,286 MW and plant availability factor of 31% [S1][S2][S22]. Measured against a widely cited latent-demand estimate of 20,000–30,000 MW for a population above 200 million, delivered grid power meets only a fraction of national need [S9][S15]. Grid reliability remained fragile into early 2026, with reported collapses in late December 2025 and January 2026. Because TCN and media reports may differ on what counts as a full collapse, the final tally should be re-verified immediately before publication [S16][S17]. For any operation dependent on grid supply, intermittency should be treated as a planning certainty rather than a contingency. The sector's financial foundation is fragile. Federal electricity subsidy reached approximately ₦1.186 trillion in the first half of 2025 [S6]; NERC-linked reporting on the Q1 2026 market report shows that the Federal Government incurred an electricity tariff subsidy obligation of approximately ₦358.32 billion in Q1 2026 [S23]. Public reporting and industry statements point to a multi-trillion-naira arrears and liquidity problem across the power value chain, but the exact GenCo/sector-debt figure should be tied to the latest official or industry statement before publication [S5][S17]. A ₦3.3 trillion legacy-debt settlement plan was approved in April 2026, with a first bond tranche of ₦501 billion raised in January 2026 [S17] — a material intervention, but one only partly executed. Two structural shifts define the strategic outlook. First, tariff reform remains partial: only about 15% of customers (Band A) pay near-cost-reflective tariffs. Band A tariffs remain close to cost-reflective levels but are no longer best described as a single uniform national number; state-level and DisCo-level variation is emerging, including the Enugu/MainPower tariff dispute [S6][S8][S10][S11][S26]. Second, decentralisation under the Electricity Act 2023 is redistributing regulatory authority from the federal regulator (NERC) to state commissions, with 15 states having transitioned to regulating their own electricity markets as of early May 2026, according to NERC [S12][S13][S24]. In parallel, captive power and off-grid solar are scaling quickly, aided by new 2026 mini-grid rules and sustained development finance [S14][S19]. **Outliers interpretation:** The prudent base case for the medium term is continued grid unreliability alongside a genuinely liberalising market. Commercial gravity is shifting away from the national grid toward state markets, embedded and captive generation, and structured off-grid supply — the segments that can generate returns without waiting for the grid or the subsidy regime to be fixed. The principal downside is timing: liquidity, tariff and jurisdictional uncertainty may persist long enough to strand capital committed on optimistic reform assumptions. Positioning should favour options that are robust to slow reform rather than dependent on it. *Note: Figures are point-in-time and should be monitored for subsequent regulatory updates.*