To Improve, Nigeria’s Electricity Market Should Be Allowed To Fail - Odion Omonfoman

Added: 2026-06-03

[00:00:04]This is the Global Business Report here on Arise News. Let's talk electricity in Nigeria. The Electricity Regulatory Commission putting out some data here on revenue collection by the discos who are at the tail end of the value chain. And you can see there out of 246 billion that was billed for the month of March.

[00:00:24]They were only able to collect 196 billion of that. About 79.6 79.5 percent in terms of collection. Now, there's also other things going on in the electricity space. You had Aliko Dangote in early May, May the 7th in an interview with Makhtar Diop who of course is the CEO of the International Finance Corporation. He only gave a statement. He said we're going into power 20,000 megawatts. He didn't actually give more details on that. Then you've got Peter Obi who of course is the presidential candidate for the NDC party for 2027. He in his acceptance speech when he accepted the nomination said that essentially he would if he was elected president would expand generation or rather expand the amount of output by 10,000 megawatts over four years. And we're still, you know, awaiting details on that. Trying to get reactions from players in the electricity space. And then you've got a letter that was written by representatives of the state electricity regulatory commissions or bureaus to the chair of the Senate Committee on power with respect to a bill to amend the electricity act. So all those issues are on the table. We're joined by Odion Omokhoman who is the CEO of New Hampshire Capital Limited joining us from our Abuja studio to react to these electricity headlines. Odion, it's good to have you. Thank you so much for for being with us. And thank you so much.

[00:01:51]Actually, I should say this on short notice for joining us. Thank you very much. Look, I wanted want with the collection data for the discos. What your what you make of that of that 79% figure for for March?

[00:02:05]>> Uh thank you for having me. Good morning, Nigeria.

[00:02:08]I think the first figure that you call the billing efficiencies where we start from before we go to the collection.

[00:02:14]What it means with a billing efficiency of about 84%. It means that for every 100 kilowatts of power generated, we are only able to bill all the discos have been only able to bill 84%. So, there's a 15 or a 16% not billed. And then of that 84% they've been only able to collect 79% of that the market is even uh uh more.

[00:02:41]Now, what it means is that since privatization to date, we've not been able to address the commercial and collection losses that has plagued the system and is one of the reasons why the sector was privatized in the first place. I'm sure there are a number of things or issues to blame, but the long and short is that collection and commercial losses are still very very significant. But, if you take the figure as is, you would see you would you would want to lump all the discos together.

[00:03:09]But, if you disaggregate it, you will see that some discos are actually doing well and then a number of discos are not really doing well. I think we should start to zero in our lenses on the discos that are really not doing well and are dragging the rest of the market down.

[00:03:25]>> Should should I know a number of discos are you know, they're they're they're covering a number of regions. Do the discos need to be Do we need small smaller discos? Do they need to be broken up to have more discos addressing I guess more regions of the country instead of one one disco that has a mass area, maybe having two or three or four and then breaking it down. Is that is that part of the solution?

[00:03:52]>> What?

[00:03:53]>> well, if you look at the the the data by NERC, you'd see that two DISCOs literally top that performance. That's Ikeja and Eko DISCO. And they cover Lagos State once more. A state that Niger State is like maybe like seven times Lagos State. Meanwhile, Abuja DISCO covers Niger State and three other states and the FCT. Massive area, right?

[00:04:16]So, to your point, I've always argued that DISCOs are too big. They need to be broken down. The way privatization was done where it was where the PHCN uh entities were split into their administrative regions rather than state boundaries has made DISCOs unwieldy in terms of their size. Therefore, we really need to start to break DISCOs or reduce them to sub-DISCOs along state lines. That's the only way we can start to track effective performance. But, I personally have always shared the thoughts that DISCOs are too large, accepting Eko and Ikeja DISCOs. Every DISCO is massive, and they need to be broken along state corridors.

[00:04:55]>> Um also, look. I mean, you've talked about this before.

[00:04:58]Meters. What about the also the the us being under metered and I guess being able to track that that that surely is another issue in terms of the the the collection part, yeah?

[00:05:13]>> Yeah. [snorts] I mean, metering is speaks to your efficiency of billing and then your ability to collect.

[00:05:20]Um to be honest, metering is not really a collection tool. It just means you're able to track the energy um that's the the consumers uh consumed, right? Collection means that you're able to put in place a collection mechanism.

[00:05:33]Either you're issuing bills on time and following through to make sure the customer pays, or you're doing a prepaid metering structure to make sure that anytime before the customer vents or consumes energy, he has already prepaid for that energy. So, the metering thing is pretty meters are simply a device just to measure energy consumption and maybe do the accounting properly energy audit.

[00:05:55]But, the actual collection structure lies with the Disco either using postpaid mechanisms, prepaid mechanisms, but you must be able to collect money. And one of the things that some Discos are now doing is to tie customers BVN and NIN to the accounts.

[00:06:10]So, where there's a default they're able to debit. But again, the first things first is accuracy of energy consumed by the customer and that's where the meter really comes in.

[00:06:19]And it's not necessarily collection, too.

[00:06:22]>> Thank you for that, you know, I don't want to drag you into politics and so I just want to but just want to get your thoughts on Peter Obi at his acceptance speech for his you know, presidential nomination you know, for the NDC ticket and then also Aliko Dangote on the private side so it's not just public though.

[00:06:43]Both men not giving much details but Aliko Dangote is saying you know, we're going into power 20,000 megawatts Peter Obi saying 10,000 megawatts over the next 4 years. Look, I I you know, again not much details but just maybe I'll allow you to speculate here. Are they are they what would allow these plans to work, Odion?

[00:07:03]>> [snorts] >> Okay, let's start with Aliko Dangote, successful entrepreneur. In fact, one of my role models Aliko Dangote and given what he's done in the sectors he's played he's played he's played is fantastic. So, him saying he wants to go into power I think is welcome but I also think we might be stretching this very far.

[00:07:22]I hazard a guess to think that Aliko might be talking about power generation for his own enterprises. Already he's a substantial generator of power. Take the Lekki refinery. I think he does about between 500 to 1,000 megawatts already.

[00:07:36]By the time you add Obajana and the other cement plants he probably is doing close to 5,000 MW if not more.

[00:07:44]And uh he's had these ambitious plan to spread out to Africa. Those plants will need power. I want to believe Aliko is talking about power generation for his enterprises.

[00:07:54]And again, if you traditionally look at the regions or the sectors Aliko plays in, he plays in largely unregulated sectors.

[00:08:03]The power sector is is heavily regulated to the extent of being, in my opinion, almost comatose.

[00:08:10]So, it would be hard to see Aliko come into the Nigerian power sector to play in the form and manner that you have that level of regulation. Now, for Mr. Peter Obi, um he's always been very bullish about power, about power generation. He talked in his last radio, he talked about Egypt and Co.

[00:08:30]I would say again, these are great things to have on paper, but we now need to start to put What is the plan to get to 10,000 MW? So, who who How will that 10,000 MW be delivered? In other words, transmitted. How will it be distributed?

[00:08:46]How will it be paid for?

[00:08:48]Which power Which technology are you using? Are you using gas to power? Are you using hydro? Are you going to do renewable energy? Where will the funding come from? Will it be government funding it or you're going to bring in private sector?

[00:09:01]You know, so those are the questions and details that we hope to see Peter Obi bring to the table. And every other political presidential aspirant going saying the same thing, they need to now show workings. As we say on the street, show workings that 10,000 MW is not 10,000 MW as just hanging there. 10,000 MW is 10,000 MW as delivered to customers and paid for, and the investors get return. Otherwise, it's still just, like you said, no detail.

[00:09:31]It's just political speak.

[00:09:33]>> Thank you for that. I want to get to another pressing matter. This one on this existing administration and policy that's actually already in place, the electricity act. Um, there's a a letter from the state electricity regulatory bureaus. They wrote it to the, uh, chairman of the Senate Committee on power, uh, regarding, uh, a bill to amend the electricity act. Can you give us the Can you give us the the the gist of of the letter?

[00:09:58]>> Okay, as as I I I I I I think I've been on your show and I've spoken about it where on the Senate floor, the Senate had done the second hearing second hearing of the of an amendment act, or sorry, an amendment bill to amend the electricity act, which President Bola Ahmed Tinubu just signed.

[00:10:17]Uh, uh, it was the first bill he signed uh, when he got into power, June uh, 2023. So, less than 2 years, there's an amendment on the floor of the Senate to amend an act that the president just signed. And guess what? That amendment, nobody had any inkling to it. It just showed up, and then it was on second hearing.

[00:10:36]Having looked at the proposed amendments of the bill, it turns out that it's an amendment that somebody is pushing or some people are pushing uh, to return us back to a situation whereby we have a centralized electricity market. And it's a market that has failed us for for 20 years. Otherwise, we wouldn't be here talking about electricity, right? Uh, so in in a nutshell, um the the the amendments or the proposed amendment by the Senate is is actually anti-constitutional because it seeks to bring us back to it seeks to use the backdoor law to uh, reverse the constitutional amendment that was done in 2023.

[00:11:17]And they're doing it in a very dangerous manner by using just a law ordinary legislation to amend the constitution. That's not done.

[00:11:26]You do not use a simple law by the National Assembly to amend a a a constitution. That's the first one. The second one is the fact that you now want to centralize control again on NERC. We've seen NERC's performance. 20 years of NERC, where are we today? It's we're in a market that is pretty much dysfunctional. But you want to retain that structure because you believe that NERC would need to have a centralized model where we are able to control subsidies and all that, you know. So, that that speaks to that speaks against what the 2022 Electricity Act tried to to to make. And then the last thing is that nobody is saying that we don't need federal control, uh coordination over um technical standards, grid reliability. I think what is most needed and what the state regulators are saying is, "Look, let's coordinate together.

[00:12:22]So, NERC and federal government entities coordinate and collaborate with state entities. States' uh houses of assemblies are not junior to the National Assembly. They are they are part of the make constitution laws for themselves. So, the point is the law as the regulator see it is trying to create a hierarchy where NERC has uh superior supremacy uh uh um when you compare them to to state regulators. And that that can't really work, right? So, in a nutshell, the state regulators are written they've expressed their concerns uh to the leadership of the power Senate Committee on Power. I hope that the Senate Committee on Power they look at it very carefully and they expose the draft to the draft bill to the public. The challenge we have in this sector is that there's been too many interventions, very quiet interventions by a few people thinking that they know best what the what works for the country. And then they make these laws, these interventions, and it makes the whole thing worse. So, I think for my personal take would be, let us allow the electricity law signed by the president in 2023 work. We can't start amending something that we've not tested yet.

[00:13:39]There will be hiccups, but it's about collaboration and not going to write the law to create a super neck that has failed in every ramification to regulate the Nigerian power sector.

[00:13:49]>> Well said. Well said. I'm I'm glad glad you've gone in depth on on what the issues are. So, Orian, look, I've asked you this This is my final question. I've asked you this question before.

[00:13:59]Look, I I don't know the the the average Nigerian thinks that because of band A to C, it suddenly power should be working and there's been a lot of pushback on it, right?

[00:14:06]What what is I know this is Maybe I don't Maybe you can address that. So, So, why people think this the the tiered structure was supposed to fix anything. My My final question to you, Orian, is look, what what do we need to get 24/7 power and how patient should we be?

[00:14:21]>> [snorts] >> Okay. Um Like I've always said, Nigeria will not get 27 uh 24/7 power. And when I mean Nigeria, Nigeria as a single unit. What you'll find out will be areas, pockets of Nigeria getting 24/7 power as we proceed. And the only way to make that happen is to allow states solve local their local power problems. The electricity act has already created a pathway for that. We are seeing what is going on in Abuja.

[00:14:55]We are seeing the plans by Lagos state.

[00:14:58]We are seeing what Enugu is planning. We are seeing other states come on board to say, "Okay, we want to take charge of our power market. We want to start to address the issues the local power issues." Right? Unless and until we allow the electricity act take effect without this threat of amendment, we will not get to this point where even we have corridors or areas in Nigeria getting 24/7 power.

[00:15:22]We might think some states are going to be far behind or thereabouts, but that's not true. Right? And even if you looked at the the Americas rather developed clients, they started off they didn't just give America didn't get 24/7 power overnight. It took a while. New York started and other areas started and then there were more innovations that brought in 24/7 power to to America. So we must be able to develop like that.

[00:15:48]The same thing with cell sites or MTNs and the mobile communication. Nigeria did not achieve 100% telecommunica- mobile tele- telephony overnight and I I don't think we have 100% yet. But it took a while. Side by side cell side by side cell sites.

[00:16:06]Right? So that's how I think the power sector will develop to get to a point where we have 24/7 power. Let's give it time. We need to be patient. Some states will get there faster than other states, but I think if we allow states take full charge of their electricity market, solve local problems, power problems, we will get there faster than allowing them to continue with managing the sector.

[00:16:30]But there's one more thing I need to say.

[00:16:32]I think we have there's a lot of there's been a lot of interventions in the power sector.

[00:16:37]Um and I my own personal take will be let us the federal government should stop making these interventions. It has worsened the sector. They are well-intentioned, but the implementation has been terrible. My take will be let allow the power sector fail if it has to fail. Let us allow it fail. Let us allow the regulators do their work. Let us allow the structures that have been set up work. If it fails, it fails. Guess what? We then have a chance to reset.

[00:17:04]But these whole interventions we borrow from the World Bank, borrow from the AfDB, come up with all manner of metering schemes that have not solved the problem, come up with rules that you know that just bypasses the problem has made the sector worse. So, my honest advice would be enough of all these interventions. Well-intentioned, well-thought-through, let us now allow a market work based on existing rules, existing regulations, existing market structures, and let's see where we go.

[00:17:32]There will be innovations, no doubt. But please, enough of these interventions.

[00:17:36]>> You know, I see this power we could talk about this for the entire show. Just real quick, let me just stretch out one more question for you.

[00:17:42]One I think one important intervention though was the 4 trillion naira debt to the GenCos. Surely that had needed an intervention from government where they floated they're going to put a bond to try and pay that off cuz the GenCos are important. Go ahead.

[00:17:55]>> Rotus, that is a Rotus Rotus, that is a problem. That intervention was not necessary. If you had allowed the market work, allowed the regulator make the tariffs, pay your bills, allow the discos pay their their settlement.

[00:18:10]But when you then free tariffs, you you free tariffs, you make you make all manner of interventions whereby the discos are not compelled to start to put more investments and make more investments, you create this this huge liability. And you also have a government on one hand trying to intervene, and then the government on the other hand not paying its bills. If you look at the debt to discos, the largest debtors to the discos are government agencies. So, on one hand you're not paying your bills, on the other hand you're structuring a market intervention to go and pay the bills I should have paid, right? You have GenCos not having power purchase agreement to EMBED.

[00:18:47]EMBED also not enforcing certain structures on the vesting contract with discos. Let just allow the market work.

[00:18:53]It's this kind of interventions where people don't do the work, we don't allow the market work, and then we say, "Okay, the federal government has to come with all manner of subsidy, which I call phantom, and then structures to build a market." That's where That's where we are.

[00:19:06]Or rather, that's where we're here today. Let us allow the market work.

[00:19:10]Government, be responsible, pay your bills, tell your agencies to pay their bills. Let your regulator work. Let the state regulators work. Set out the rules, and then we'll we'll get a more efficient market.

[00:19:22]>> All right. So, do you know what? Okay, you know what? This is actually is my final question. Are you optimistic that there will be better um that we that things can improve in the power sector going forward? This is the final final final question.

[00:19:33]>> Oh, not a problem. I I I mean, I'm extremely optimistic. Uh you only needed to be in some of these um in the ground uh market engagement by state electricity regulators. I was in the Lagos one. I was in Abia. And I'll be going for a couple of And you will see the plants. You already see that people are investors already keying into this market. Power plants are being developed as we speak. Uh regulatory structures and instruments are being developed that will make discos more efficient or rather sub cos more efficient, right?

[00:20:04]And customers are now able to go straight to their regulators within their state. They're no longer having to write long letters to Abuja. They are now beginning to deal with local power issues as simple as my transformer in my area is not working.

[00:20:19]Right? That's the kind of thing that NERC was trying to solve before, and then it never so it never got solved.

[00:20:24]But then you now have local regulators solving it, right? I think with more coordination we will get there. I'm extremely optimistic to the extent that those uh who are more federalist in opinion do not get their way. They allow the electricity act work. They do not impede it by going to uh create uh uh uh amend the electricity act that will now weaken the powers of state. If that is done to the extent that the electricity act remains as is, then I'm extremely optimistic. Uh it's just a matter of time, uh according to somebody who will sing Kumbaya.

[00:20:58]>> Odion Omonfoman, uh CEO of New Frontier Capital Limited, always always a pleasure talking to you about the power sector. Thank you so much for joining us. We really appreciate your time.