Nigeria’s €2.3bn Power Project Misses Targets, Exposes Structural Weaknesses

Power Sector Reform Under Scrutiny as €2.3bn Electricity Project Underperforms

Nigeria’s ambitious €2.3 billion Presidential Power Initiative (PPI), designed to transform the country’s electricity supply and increase generation capacity to 25,000 megawatts (MW) by 2025, has failed to meet its targets. Despite significant financial commitments and a multi-year implementation roadmap, actual power delivered to consumers remains far below projections, highlighting persistent structural challenges in Nigeria’s electricity value chain.

The project, executed in partnership with Siemens and coordinated by FGN Power, aimed to modernise generation, transmission, and distribution infrastructure across the country. However, five years after launch, Nigeria continues to struggle with limited electricity supply, with generation hovering around 5,000MW and effective distribution significantly lower, according to data from the Nigerian Independent System Operator (NISO).

Ambitious Targets, Limited Results

The Presidential Power Initiative was introduced as a phased reform programme intended to overhaul Nigeria’s electricity sector. Under the roadmap, the government planned to increase operational power supply to 7,000MW by 2021, expand to 11,000MW by 2023, and reach 25,000MW by 2025.

These milestones were intended to address chronic electricity shortages affecting households, businesses, and industrial activity across the country. Yet the project failed to achieve even the initial target. Current electricity generation remains around 5,000MW, with transmission capacity slightly above 4,000MW and actual power distributed to consumers estimated at roughly 3,000MW for a population exceeding 200 million people.

Energy analysts note that Nigeria’s installed generation capacity is technically higher estimated at more than 12,000MW but operational constraints prevent the system from delivering that capacity to end users.

Structural Constraints Across the Power Value Chain

Experts attribute the underperformance of the initiative to deep structural weaknesses in Nigeria’s electricity sector. These include ageing transmission infrastructure, high technical and commercial losses, weak metering penetration, and persistent liquidity challenges within the market.

Energy law specialist Professor Yemi Oke of the University of Lagos identified transmission and distribution as the most critical bottlenecks. According to Oke, frequent grid instability, infrastructure limitations, and losses within the distribution network undermine the system’s ability to deliver power effectively.

Distribution companies face additional challenges, including widespread energy theft, estimated billing disputes, and low tariff recovery. These issues weaken the financial sustainability of the sector and reduce the capacity for reinvestment in infrastructure.

Gas supply disruptions further complicate the situation. Because Nigeria’s electricity generation relies heavily on gas-fired power plants, shortages in gas supply often reduce the available generation capacity even when installed infrastructure exists.

Economic Consequences for Businesses and Investment

The underperformance of the power sector has measurable consequences for Nigeria’s economic competitiveness. According to the Lagos Chamber of Commerce and Industry (LCCI), unreliable electricity forces businesses to rely heavily on diesel and petrol generators, significantly increasing operating costs.

For manufacturing firms and service providers, energy expenses represent a major share of production costs. Small and medium-sized enterprises are particularly affected, as many lack the financial capacity to maintain independent power solutions.

High energy costs reduce productivity, limit expansion opportunities, and weaken the competitiveness of Nigerian businesses in regional markets. Analysts warn that persistent electricity shortages may also discourage foreign direct investment, as investors typically prioritise markets with stable and predictable energy infrastructure.

Implications for Industrialisation and Economic Growth

The Centre for the Promotion of Private Enterprise (CPPE) emphasises the central role of electricity in economic development. Reliable power supply remains a fundamental requirement for industrialisation, job creation, and productivity growth.

When businesses rely on alternative energy sources such as diesel generators, production costs increase and product prices become less competitive. This dynamic limits Nigeria’s ability to expand manufacturing output and participate effectively in regional trade frameworks such as the African Continental Free Trade Area (AfCFTA).

Without substantial improvements in electricity supply, analysts warn that Nigeria’s long-term industrial ambitions may remain constrained.

Government Response and New Reform Efforts

Despite the project’s setbacks, federal authorities maintain that reforms are continuing. FGN Power has indicated that new infrastructure projects are underway, including the construction of multiple substations intended to strengthen transmission capacity.

Under the next phase of implementation, three substations Abeokuta, Ayede, and Onitsha are expected to be completed by 2026, while additional facilities in Sokoto and Offa are scheduled for completion in 2027. These projects are expected to add approximately 984MW of wheeling capacity to the national transmission network.

The government has also approved the creation of a Grid Assets Management Company (GAMCO), a new institutional framework intended to improve grid management and address the issue of stranded power capacity. The initiative aims to unlock underutilised generation assets and develop new transmission corridors, particularly along the Benin–Lagos axis.

However, some sector stakeholders have raised concerns about potential overlaps between GAMCO and existing regulatory institutions, warning that governance clarity will be essential to avoid institutional conflicts.

Outlook for Nigeria’s Power Sector

The failure of the €2.3bn Presidential Power Initiative underscores the scale of Nigeria’s electricity infrastructure challenge. While the programme highlighted the government’s intention to modernise the sector, implementation gaps across generation, transmission, and distribution prevented the project from delivering its intended impact.

Industry stakeholders argue that future reforms must focus on strengthening transmission infrastructure, improving gas-to-power supply chains, and enhancing regulatory transparency. In parallel, decentralised solutions such as mini-grids, embedded generation, and renewable energy systems may help relieve pressure on the national grid.

For policymakers and investors alike, the central lesson remains clear: sustained infrastructure investment and institutional reforms will be essential if Nigeria intends to close its electricity deficit and unlock long-term economic growth.