Structural reforms, market-driven efficiencies to reshape Nigeria's power sector in 2025

Nigeria's power sector is on the cusp of significant transformation, with structural reforms and market-driven efficiencies set to reshape the industry by 2025. A recent report by Cardinal Stone highlights the key challenges facing the sector, including grid collapses, infrastructure vandalism, liquidity constraints, and gas supply shortages. The report also points towards a gradual shift to full cost-reflective tariffs across all customer bands over the next three years. Adebayo Adebanjo, a Senior Analyst at Cardinal Stone Securities, discussed the report in an interview on CNBC Africa. Adebanjo emphasized several key highlights of the report, focusing on the evolving relationship between DISCOs and GENCOs, the transition to cost-reflective tariffs across various customer bands, government initiatives to enhance the grid infrastructure, and the implementation of state-led electricity solutions. Adebanjo highlighted the importance of funding for the success of state-led electricity solutions, emphasizing the need for investors to support decentralization efforts. Several states have already commenced operations to generate their own electricity, laying the groundwork for a more sustainable energy future. Adebanjo also discussed the gradual phase-out of EMBED from the Nigerian electricity supply industry, noting its crucial role in ensuring payment guarantees to GENCOs but signaling a shift towards greater operational efficiency for DISCOs. Adebanjo underscored the importance of metering initiatives and improved collection practices to enhance the viability of DISCOs in the evolving energy landscape. With ongoing reforms and strategic investments, Nigeria's power sector is poised to overcome longstanding challenges and embrace a more sustainable and efficient energy ecosystem by 2025.