…let us retire the annual ritual of outrage over the ₦17.45 billion. We should note properly: it is a modest service charge on a trade that Nigeria disciplined and guaranteed years ago, not evidence that our neighbours are fleecing us. The more useful truth is that Nigeria already has a model that works; direct, guaranteed, bilateral contracts, proven with international customers and with our own industry.
The neighbours’ ‘debt’ is a residual service charge on a trade that Nigeria disciplined and guaranteed back in 2019. The real opportunity is to scale the commercial model that already works.
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Every few months, the same headline returns: Benin, Togo and Niger owe Nigeria billions of naira for electricity. This quarter it is about ₦17.45 billion. It arrives with the same wave of indignation, that we are keeping our neighbours in light while our own citizens sit in darkness. It makes for a good headline. It is also, on the numbers, a non-story, and it distracts from a far more hopeful one.
Begin with what that figure actually is. The payment risk it seems to describe was dealt with years ago. Under the Eligible Customer reforms of 2017 and the Willing Buyer, Willing Seller framework of 2019, cross-border and large-industrial electricity supply was moved onto direct, guaranteed bilateral contracts entered by neighbouring utilities directly with Nigerian Generating Companies (Gencos). To buy power this way, a customer must post a letter of credit or a bank guarantee to the market operator before a single megawatt flows. That is precisely why the energy trade with our neighbours works: it was designed to be commercially disciplined, and it runs on surplus capacity, not on power taken from Nigerian homes, and is capped at less than 10 per cent of the power on the grid.
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So what is the ₦17.45 billion? It is a residual service charge, the regulated fee that covers the regulator, the transmission company, the bulk trader and the market and system operator, running at around $20 million a quarter. The value of the electricity itself, the energy and capacity for the roughly 350 megawatts supplied, is settled separately under those guaranteed contracts, and it is larger. The number in the news is the small administrative slice of the trade, and it happens to be the one layer not yet fully behind a guarantee. The neighbours pay this slice to the generating companies, alongside their energy and capacity charge; it is the generating company that pays the market operator. Even that is now being closed: the system operator is moving to secure its service charges the same way the energy contracts already are. Where a balance lags, it is usually an older government-linked plant on legacy terms, inside a market simply mid-way through a transition, not a foreign default.
By the middle of last year, fewer than a third of grid generators had such contracts; the rest were still supplying on trust, which is how the debt builds. Finishing that transition, patiently and without disrupting supply, so that a distribution-to-generation contract carries the same discipline as an industrial or cross-border one, would close the single biggest hole in the system.
This is the part worth dwelling on, because it points to what Nigeria should do next. The same commercial discipline that quietly fixed the cross-border trade also governs the power that our factories buy. On that same June day, 228 megawatts went directly from generators to Nigerian industry, to steel mills, food processors and manufacturers, under guaranteed bilateral contracts. Those customers pay, they get reliable power, and they sidestep the collection weakness of the distribution network entirely. It is, without fanfare, the healthiest part of the whole system.
That is the segment to grow with urgency, precisely because it does not wait on fixing everything else first. Nigeria can expand commercially-contracted supply both on the grid, as embedded generation, and off it, as captive plants and mini-grids, and it can start where the money is most bankable: agro-processing zones and staple-crop clusters first, then commercial hubs and the big cities. These are dense, high-value, creditworthy loads that can carry cost-reflective, guarantee-backed contracts today. Every megawatt sold this way is a megawatt that is actually paid for, that guarantees more industrial output, more jobs, and proof to lenders that the model scales.
The same logic can be carried into the last and largest corner of the sector. Most of the roughly ₦6.8 trillion that generators are owed sits in the relationship between the distribution and generation companies. Here too the fix is already in motion: the regulator’s 2024 move to bilateral trading is pulling generators and distributors off the old single-buyer pool and onto direct, guarantee-backed contracts. By the middle of last year, fewer than a third of grid generators had such contracts; the rest were still supplying on trust, which is how the debt builds. Finishing that transition, patiently and without disrupting supply, so that a distribution-to-generation contract carries the same discipline as an industrial or cross-border one, would close the single biggest hole in the system.
The job now is neither dramatic nor punitive. It is to scale that model into our agro-processing zones and cities, extend it to the rest of the value chain, and keep closing the leaks at home. The people running this sector are, for the most part, already on that road. What they need is for the rest of us to help them move faster along it, not to keep relitigating a debt that was settled, by design, a long time ago.
None of this excuses the losses inside our own network, and that work matters too. On 28 June about 399 megawatts, a power station’s worth, was lost inside the grid before reaching any customer, and the larger loss is downstream, where distribution and collection losses of 30 to 40 per cent cost the distribution companies hundreds of billions of naira a quarter. Metering, reinforcing the weakest transmission corridors and a serious posture against vandalism and theft are the tools, and every recovered megawatt is the cheapest power in the country. These are being tackled; they should be tackled faster.
So let us retire the annual ritual of outrage over the ₦17.45 billion. We should note properly: it is a modest service charge on a trade that Nigeria disciplined and guaranteed years ago, not evidence that our neighbours are fleecing us. The more useful truth is that Nigeria already has a model that works; direct, guaranteed, bilateral contracts, proven with international customers and with our own industry. The job now is neither dramatic nor punitive. It is to scale that model into our agro-processing zones and cities, extend it to the rest of the value chain, and keep closing the leaks at home. The people running this sector are, for the most part, already on that road. What they need is for the rest of us to help them move faster along it, not to keep relitigating a debt that was settled, by design, a long time ago.
Figures are drawn from NERC market reports and the National Control Centre’s daily load allocation for 28 June; the market operator invoice reflects regulated service charges, not the value of energy supplied.
Tobi Oluwatola is a partner at AP3 Advisory Services and chief executive of TAO Technologies. He advises on the UK PACT Nigeria Energy Programme.
