Nigeria's $2B power bailout tests Tinubu reforms

Blessing Johnson no longer fills her freezer. The frozen food vendor in Lugbe, a suburb of Nigeria's capital, Abuja, now keeps her stocks deliberately low. Earlier this year, ahead of the Eid al‑Fitr festive period, her area went nearly two months without electricity. Most of her stock spoiled, forcing her to sell what remained at below cost. "I had to sell some at a loss, things I should sell for 2,500 naira ($1.85), I sold for 1,500 naira or even less — just to avoid losing everything," she said, adding that she lost more than she gained. "I used to fill my freezer with chicken, turkey, and fish," she told DW. "Now I limit what I buy because I'm scared it will spoil." Johnson's experience reflects the reality for many small business owners across Nigeria, where an unreliable power supply continues to threaten their businesses. Power cuts squeeze Nigeria's small businesses At the start of April, Nigerian President Bola Tinubu approved the payment of 3.3 trillion naira (over $2 billion) to settle longstanding debts owed to power generation companies. Olu Arowolo-Verheijen, Tinubu's special energy adviser, said the program "is not just about settling legacy debts," but aims to restore "confidence across the power sector."Nigeria's unreliable power supply threatens Blessing Johnson's frozen food business in AbujaImage: Jamiu Abiodun Arowolo-Verheijen noted that it was about "ensuring gas suppliers are paid, power plants can keep running, and the system begins to work more reliably." And while experts believe the settlement would boost reliability, they argue that it's not a silver bullet for solving issues plaguing Nigera's energy sector. Ayodele Oni, an energy industry analyst, said the move "still wouldn't even solve all of the indebtedness but it would pay gas producers an amount or a part of what's owed them." "Of course, that would mean that there'd be more gas available for the power sector," Oni told DW. Why privatization failed to fix Nigeria's power sector In 2013, the Nigerian government privatized its power sector. But unlike the country's banking and telecom industries, which have seen rapid growth over the years, the power sector continues to struggle and has not translated into stable supply for Nigerians. The World Bank estimates that the Nigerian economy loses $29 billion annually due to unstable power supply that causes frequent blackouts across the country. With an average supply of less than 4,000 megawatts, around 90 million of Nigeria's 242 million people live without access to electricity. Decades of underinvestment and aging infrastructure have left the grid vulnerable to tripping. Debt, tariffs and a broken power market At the same time, tariffs, according to analysts, are not cost-reflective. Electricity distribution companies have often struggled to cover the cost of generating and transmitting power. Is nuclear energy Africa's way out of electricity crisis?To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video In 2024, Abuja's electricity distributor threatened to disconnect the presidential villa and dozens of federal agencies over more than 47 billion naira in unpaid power bills. This gap has forced authorities to intervene repeatedly, accumulating debts in the process, while structural issues remain across transmission and distribution chains. "Tariffs are fundamental, but there are other issues around infrastructure and the implementation of the market design," Ayodele said. He noted that the design requires ancillary services to improve the grid, "and with an emergency management system that can remotely monitor the infrastructure and network." Ayodele said that "all of these, for a very long time, were not in place." Ikemesit Effiong, managing partner at SBM Intelligence, an Africa-focused consulting firm, said that distribution companies lack the capital and political will to "meter customers, collect revenue, and maintain infrastructure." "And without retail viability, generation and transmission investments simply cannot sustain themselves."Why clearing debt won't fix the power sector The government's intervention is expected to ease pressure on generation companies and restore some level of confidence in the market, Ayodele said. But both analysts agreed that clearing existing debts would not seamlessly address the underlying issues the sector is grappling with. Ikemesit mentioned that without reforms to ensure cost-reflective tariffs, improved governance and accountability across the value chain, there's a risk that the same condition could lead to another cycle of debt accumulation. "Without binding conditions, this becomes a template: underperform, accumulate debt, get bailed out," Effiong said. "To break the cycle, the government must tie disbursements to metering targets, collection benchmarks, and transparent audits. Publish who gets paid, why, and on what terms." But for now, small business owners like Johnson are bearing the brunt. She rummaged through the pile of fish in her warm freezer and handed over a midsize fish to a customer without making eye contact. "The government keeps approving huge amounts of money for electricity, but we don't see the impact," she said. "If they really want to help businesses grow, they should fix power, even if it's just that one thing." Why does AI need so much energy? To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Edited by: Keith Walker