Benin and Togo are contemplating direct purchases of electricity from Nigeria’s power generation companies (GENCOS), a move that highlights the ongoing challenges within Nigeria’s power sector. Currently, Nigeria’s power supply fluctuates between 3,000 and 4,000 megawatts, despite an installed generation capacity of 14,000 megawatts.
As of now, debts owed to GENCOS have surpassed one trillion naira, with the total debt of power generation companies reaching approximately ₦6.8 trillion. This financial strain has led to several GENCOS shutting down operations, exacerbating the already precarious power situation.
Joy Ogaji, a representative from the Association of Power Generation Companies, noted, “Liquidity constraints continue to strain the generation companies. Gas supply limitations disrupt consistent power delivery, with end users struggling with unreliable electricity.” This sentiment reflects the broader issues affecting the sector, where thermal plants, which produce over 70% of Nigeria’s electricity, are heavily reliant on natural gas.
Despite a contracting capacity of 606 megawatts for international customers, these entities typically receive only an average of 306 megawatts. This discrepancy raises questions about the efficiency of Nigeria’s power distribution infrastructure. Edmund Eje, from the Nigerian Independent System Operator, explained, “They have asked why we are not able to evacuate to them, and we have explained that our infrastructure cannot evacuate optimally to their demands, which can overstretch our grid if there’s an overload.”
Three generation companies have approached the Nigerian Independent System Operator to establish a power purchase agreement with Togo, indicating a potential shift in how power is traded in the region. However, the exact impact of these direct purchases on costs remains unclear.
Gas supply limitations continue to hinder consistent power delivery, with reports indicating that for every N100 invoiced by a thermal GenCo, between N60 and N70 goes directly to gas suppliers. Furthermore, the instability of the grid consumes about 15 to 25 percent of gas that GENCOS must pay for, further complicating the financial landscape.
As discussions progress, observers are keenly watching how these potential agreements will unfold and what they may mean for the future of power generation in Nigeria and its neighboring countries. Details remain unconfirmed regarding the specifics of the agreements and their implications for pricing and supply stability.