No power turnaround, no industrial take-off

The power sector continues to garner interest due to its role as a primary driver for industrialisation in most economies. In Nigeria the manufacturing sector currently accounts for just 10% of total GDP, compared with 15% in South Africa. The FGN currently estimates national energy demand at 22,560 megawatts (MW). Meanwhile, power generation capacity from the grid is c.7,000MW while distribution capacity is still c.5,000MW. Until power shortages are curbed to a bare minimum, Nigeria’s industrial take-off will remain delayed.


  • According to the most recent data from the Federal Ministry of Power, Works and Housing, peak generation was 4,587MW on Monday (this week). Its lowest generation was 3,103MW.
  • Insufficient gas supply continues to affect power distribution. This was the major constraint on 08 May when the lowest generation of just 41MW (see chart below) was recorded.
  • Asides from infrastructural issues, the sector suffers from revenue collection challenges, which negatively impacts the entire value chain. The DISCOs struggle to collect revenue from consumers due to metering issues and this affects payments to GENCOs, ultimately resulting in a cash flow squeeze. The tariff structure very likely needs to be revised to reflect current realities such as fx depreciation.
  • The capital of some GENCOs and DISCOs is inadequate. Investors will need to inject more capital to lessen the debt burden they currently carry.

Sources: Federal Ministry of Power, Works and Housing; FBNQuest Capital Research


  • If this myriad of issues was meaningfully resolved, the sector could also attract risk guarantees, which it has sought but largely failed to secure.
  • Nigeria’s GDP managed to grow at an average of 6% y/y in the first half of the 2010s before the oil price slide that started in 2014, regardless of power supply challenges. If power supplies were transformed, we could add at least two percentage points to potential GDP growth.

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