Geometric Power chairman calls for cost-reflective tariffs, private sector investment and improved gas supply, citing Aba as a model for reliable electricity delivery.
Founder and Chairman of Geometric Power Group, Professor Bart O. Nnaji, has called on the Federal Government to urgently address the country’s electricity challenges, warning that high energy costs and unreliable power supply continue to undermine business survival, industrial growth and national economic development.
Nnaji made the call while delivering a keynote address titled “Energy Costs and Business Survival: Driving Profitability amid Nigeria’s Power Crisis” at the Lagos Country Club Business Forum 3.0, held in Ikeja, Lagos, on Friday.
The former Minister of Power identified inadequate investment, policy inconsistencies, non-cost-reflective electricity tariffs, insufficient gas supply and weaknesses in the transmission network as major obstacles preventing Nigeria from achieving reliable and affordable electricity.
He argued that the country’s electricity crisis cannot be resolved without a deliberate partnership between government and private investors, supported by policies that encourage long-term investment in power infrastructure.
Privatisation failures continue to affect electricity sector
AReflecting on the 2013 privatisation of the Power Holding Company of Nigeria (PHCN), Nnaji said the process was undermined by excessive profit expectations and abuses that weakened the foundations of the electricity industry.
According to him, many investors entered the sector expecting returns comparable to the telecommunications industry’s investment boom, without adequately appreciating the enormous capital requirements and long investment gestation periods associated with electricity infrastructure.
He noted that some power investments could take between seven and 10 years to break even, stressing that patience and commitment to national development must complement the profit motive.
Nnaji also disclosed that electricity sector debts had exceeded N7 trillion, citing figures attributed to the Association of Power Generation Companies of Nigeria.
He warned that the financial difficulties of electricity distribution companies (DisCos) were affecting the entire power value chain, from generation companies (GenCos) to gas suppliers and transmission operators.
Cost-reflective tariffs critical to sector sustainability
The Geometric Power chairman identified the inability of electricity distribution companies to operate with cost-reflective tariffs as a major contributor to their financial difficulties.
He explained that investors acquired distribution companies during the privatisation exercise based on assurances that tariffs would reflect the actual cost of electricity supply.
Nnaji recalled his involvement in the tariff adjustment process in 2012, when electricity tariffs were increased from a flat N6 per kilowatt-hour to approximately N22 per kilowatt-hour.
He said the adjustment was accompanied by extensive public sensitisation and measures to protect low-income urban and rural electricity consumers.
According to him, government must either permit cost-reflective tariffs or accept the responsibility of funding the difference through subsidies.
He illustrated the financial burden of electricity subsidies, saying that a subsidy of just N50 per kilowatt-hour for 5,000 megawatts could cost government approximately N180 billion monthly, or N2.16 trillion annually.
The situation, he argued, contributes to mounting government obligations to generation companies and limits their ability to invest in additional power plants.
Nigeria needs 100,000MW to achieve economic transformation
Nnaji said Nigeria currently has an installed generation capacity of approximately 13,000MW, but only about 4,000MW to 5,000MW is available on the national grid because of transmission infrastructure limitations.
He estimated that the country would require at least 100,000MW of electricity to attain the economic development levels of countries such as Brazil and Indonesia.
He maintained that the private sector must play the leading role in developing the additional generation capacity, with government providing the necessary policy and financial guarantees.
The professor identified the suspension of the Partial Risk Guarantee (PRG) in 2015 as a major setback to investment in grid-connected electricity generation.
He disclosed that a proposed 1,080MW power plant being promoted by Geometric Power in partnership with General Electric had remained stalled following the suspension of the guarantee, despite millions of dollars already invested in the project.
He also mentioned proposed 500MW projects associated with ExxonMobil and Century Power as investments that had similarly been affected.
Nnaji explained that the PRG was important because it provided investors with assurance against the risks associated with government-backed electricity offtake arrangements.
Gas shortage threatens electricity generation
On the supply side, Nnaji identified inadequate natural gas production and transportation infrastructure as another major obstacle to reliable electricity.
He observed that approximately 73 per cent of Nigeria’s power plants are gas-fired, making dependable domestic gas supply essential to the country’s electricity future.
Despite Nigeria’s estimated 210 trillion cubic feet of natural gas reserves, he lamented that domestic power producers struggle to obtain sufficient and reliable gas supplies at government-approved domestic gas prices.
He argued that the country must strike a better balance between its ambitions to export natural gas and the need to make adequate supplies available for domestic electricity generation.
Nigeria’s electricity costs compared with other countries
Presenting comparative figures on electricity costs across different regions, Nnaji said the average business electricity cost was approximately:
Europe: N297 per kWh.
Oceania: N321 per kWh.
South America: N279 per kWh.
North America: N225 per kWh.
Africa: N184 per kWh.
Asia: N151 per kWh.
He further cited Germany’s electricity cost at N575 per kWh, compared with N28 per kWh in Iran, N255 per kWh in Ghana, N112 per kWh in China and N70 per kWh in Ethiopia.
He attributed the relatively low electricity costs in countries such as Iran, China and Ethiopia partly to abundant natural resources, hydroelectric power and government subsidies.
According to him, the critical difference between Nigeria and many countries with higher electricity tariffs is the availability and reliability of electricity.
He recalled his position during his time in government that the cost of darkness was effectively infinite, while the cost of electricity was finite and could be managed through collaboration between government and the private sector.
Aba Power offers a model for industrial recovery
Using the Aba Integrated Power Project as an example, Nnaji argued that reliable electricity, even at cost-reflective tariffs, could improve business profitability and stimulate industrial development.
He said electricity tariffs within the Aba ring-fenced distribution area were approximately N240 per kWh for industrial consumers and N219 per kWh for residential customers, below the N255 per kWh figure he cited for Ghana.
According to him, businesses initially expressed concerns about the tariffs but gradually embraced the arrangement after experiencing round-the-clock electricity supply and reducing their dependence on expensive diesel-powered generators.
He disclosed that businesses in Aba were increasingly operating multiple production shifts, activating previously idle machinery and expanding their operations.
Some companies that had closed or were close to shutting down were reportedly resuming activities, while new businesses were establishing operations within the nine local government areas served by Aba Power.
Nnaji also said Aba Power had invested approximately N50 billion in providing smart meters to more than 96 per cent of its customers within less than three years.
He attributed the achievement to the company’s creditworthiness, which enabled it to establish bankable financing arrangements with meter suppliers.
The distribution network, he said, serves approximately four million people across an area of about 4,000 square kilometres.
He maintained that the Aba experience demonstrates that businesses require dependable electricity at an affordable and predictable cost, rather than simply low electricity tariffs accompanied by unreliable supply.
Calls for a stakeholder-driven electricity sector
Beyond infrastructure and pricing, Nnaji advocated a fundamental shift in the philosophy guiding investment in Nigeria’s electricity industry.
He said businesses should move beyond an exclusive focus on maximising shareholder returns towards a stakeholder-oriented approach that recognises the broader economic and social benefits of reliable electricity.
He explained that Geometric Power’s investment philosophy was built around enabling manufacturers, hospitals, laboratories, schools, markets and other institutions to operate efficiently.
According to him, improving electricity supply across different parts of the country would promote economic opportunities, reduce regional development disparities and strengthen social stability.
He warned against concentrating industrial development in Lagos and other established economic centres, arguing that infrastructure investment should support productive activities across the country.
Government urged to demonstrate political will
Concluding his address, Nnaji called on political leaders to prioritise national interest over personal and sectional considerations and take decisive steps towards ending Nigeria’s energy poverty.
He said Nigeria possesses substantial natural gas resources, a capable private sector and the potential to attract international investors to develop the infrastructure required for a reliable electricity system.
However, he stressed that these advantages would remain underutilised without consistent government policies, appropriate investment guarantees and the political will to implement meaningful reforms.
He urged government to create an enabling environment in which private investors could finance and develop power infrastructure while ensuring that businesses and households receive dependable electricity at sustainable costs.
“If electricity is reliably available, the products of our manufacturers will easily compete in the world market,” Nnaji said, underscoring the importance of dependable power to Nigeria’s industrial competitiveness.
He expressed appreciation to the leadership of Lagos Country Club, led by Seyi Adewumi, for inviting him to address the business community.