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Nigeria Power Market Tycoon Calls for Energy Grid Reforms

A Nigerian businessman who controls 15% of the country’s electricity market has called for an overhaul of the grid to solve long-running problems with supply.

Tony Elumelu, who controls several power sector companies, told Bloomberg in an interview that Nigeria needs more transmission lines and the electricity market needs more liquidity in order to reverse years of insufficient supply that is hampering economic growth.

“As a country, we can’t produce well enough in spite of our natural resources. The reason is lack of electricity,” Elumelu said.

Nigeria can produce around 13 GW of electricity but only delivers about 4 GW to the grid due to constraints, which means most of its population is solidly dependent on home generators for their power supply. A privatization drive that saw 15 power generators move from state into private hands in 2013 was expected to solve the problem but the transmission lines remained state-owned and no meaningful investments were made in expanding the network.

So, while power generation increased, bringing the electricity to end consumers was hampered by the size of the grid.

“Even where you generate electricity, the grid cannot take it, so it’s a problem for us,” Elumelu explained to Bloomberg. “I am advocating that let us privatize transmission lines.”

The businessman, whose company Transcorp Power Ltd. went public this week with a valuation of $1.2 billion, also suggested that the government attracts investors to develop Nigeria’s substantial natural gas reserves and sell them to power generators.

The country has problems in the distribution segment as well. There are 11 power distribution companies operating in Nigeria but they are all struggling with a lack of capital and exorbitant tariffs imposed by the country’s electricity market regulator.

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These persistent problems have culminated in frequent blackouts and a “total system collapse” that occurred in September last year. The collapse was caused by an explosion at a transmission line, which tripped the grid bringing power generation to zero.

By Charles Kennedy for Oilprice.com

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