This might be Africa's single biggest power problem

From the newsletter

Nigeria’s grid infrastructure is set for a major upgrade after securing $238 million in funding from the Japan International Cooperation Agency (JICA). The investment will focus on strengthening the transmission network, which has been a bottleneck in the country’s power sector and a key cause of frequent outages and unreliable power supply.

• Experts estimate that Nigeria will need at least $1.5 billion annually over the next decade to modernise its outdated grid infrastructure. The government is also moving fast with policy changes to encourage private sector participation.

• A major challenge remains the low electricity bill collection rate, severely limiting the national utility’s revenue generation. To address this, plans are underway to install meters for the 7 million customers who are still unmetered.

More details

• The funding was announced at the recently concluded TICAD conference in Japan, which wrapped up last Friday. In total, African countries secured pledges worth $5.5 billion in loans to be provided through the African Development Bank. The conference marked a shift away from traditional aid, with a stronger emphasis on private sector–driven solutions, a trend also observed this year from the USAID and the European Union.

• Nigeria is pursuing an additional $190 million loan from JICA to scale distributed renewable energy solutions across underserved communities. This builds on the recently launched $750 million World Bank Distributed Access through Renewable Energy Scale-up (DARES) programme under the Mission 300 Compact, which aims to deliver clean and reliable electricity to more than 17 million Nigerians.

• Nigeria remains one of the countries with the largest electricity access gap, with roughly 80 million people lacking power, most of them in rural areas. Extending the national grid to these communities is costly and offers limited returns due to low consumption patterns, making off-grid programs the more viable option.

• In urban areas, grid connections remain more suitable given dense populations and higher consumption. However, expansion has been constrained by the national utility’s debt burden and the high cost of building transmission infrastructure. The economic toll is heavy. Nigeria loses approximately $29 billion annually from unreliable electricity and power outages, with businesses losing around 15.6% of sales.

• With rapid urbanisation, demand for reliable, modern electricity infrastructure is non-negotiable to support economic growth. At the same time, renewable energy projects are driving demand for new transmission lines, as most are greenfield projects built in areas without existing grid connections. This burden has been difficult for the government to shoulder alone, leading to the liberalisation of the electricity market, which now allows private sector investment across the entire power supply chain.

• Poor grid infrastructure, however, is not just a Nigerian problem but an Africa-wide challenge. Less than 5% of total capital flows to Africa’s energy sector have historically been directed to grid infrastructure. Recently, though, we’ve seen an uptick in funding from the AfDB and the World Bank. As more countries adopt renewables, the demand for interconnected grids will only grow. This will further push demand for grid capital high as countries with intermittent renewables look to source firm power from the electricity market.

Our take

• The liberalisation of the electricity market is a key policy change, but the government must move faster to create an attractive environment for investors. This includes streamlining regulatory processes, ensuring a robust legal framework, and addressing the ongoing issue of debt and revenue collection within the national utility.

• The current shift from traditional aid to private sector-driven funding is a wake-up call for African countries. There is a pressing need for better transparency and accountability to ensure that such funding achieves its intended development goals.

• Building transmission networks should not only focus on local needs but also be designed with regional interconnection in mind. The future power market is set to be more interconnected, where countries with the best resources will generate and sell electricity to those where generation is more expensive.