Nigeria Must End Government Funding Dependence in Electricity Sector, Says Presidential Aide

Nigeria's electricity sector must break free from its dependence on federal government funding and interventions to become sustainable, according to Dr. Lanre Babalola, Special Adviser to the President on Power. Babalola, who also chairs the Presidential Task Force on Power Sector Reset and Restoration, emphasized the need to restructure the sector to attract private capital and operate on a commercially viable basis.

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When revenues are not collected, DisCos cannot meet their obligations. When GenCos are not paid, they cannot adequately maintain their plants or pay for gas. When gas suppliers are not paid, investment in gas supply suffers.

Speaking at an event honoring Dr. Joy Ogaji for her service in the power sector, Babalola identified the core challenge not as a lack of generation capacity, but an inability to consistently convert available capacity into reliable electricity, revenue, and sustainable investment. He explained that electricity generation only creates value when the entire chain, from generation and evacuation to distribution, metering, billing, and payment, functions effectively. "When revenues are not collected, DisCos cannot meet their obligations. When GenCos are not paid, they cannot adequately maintain their plants or pay for gas," he stated, highlighting the cascading effect of payment failures.

Babalola described this as a "value-chain liquidity problem," stressing the interconnectedness of electricity, gas, and finance. While government interventions have historically kept the market afloat, he warned that "keeping a market alive is not the same thing as making it sustainable." The presidential aide asserted that the government can no longer indefinitely finance the sector. Instead, its role should evolve towards creating an environment where private capital can invest and achieve sustainable returns. "Government intervention should create the market, not become the market," he advised.

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keeping a market alive is not the same thing as making it sustainable.

For investors to commit capital, Babalola outlined essential conditions: predictable regulation, credible contracts, payment security, reliable fuel supply, bankable offtake arrangements, and transparent settlements. He suggested that the success of the sector reset should be measured by the volume of private investment attracted, rather than just government spending. Furthermore, he called for maximizing the utilization of existing infrastructure, rehabilitating power plants, clearing transmission bottlenecks, and strengthening distribution networks, before investing in new projects.

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Government intervention should create the market, not become the market.