2022 data from the Nigerian Electricity Regulatory Commission (NERC) shows that independent power plants (IPPs) accounted for 31.2% of total GenCos capacity, a 300 basis points decline from 2021 due largely to gas constraints and faulty machinery. In addition, on average, only five IPPs: Azura-Edo (26%), Odukpani (19%), Okpai (16%), Afam VI (15%) and Rivers IPP (8%) jointly accounted for circa 84% of power generated from the 12 independent power producers in the last four years, due partly to gas constraints. Gas constraints remain prevalent despite the fact that Nigeria has the world’s ninth-largest proven gas reserves, estimated at 204 trillion cubic feet in 2022. The domestic gas market grapples with chronic under-investment in generation and distribution infrastructure. Yet, at the same time, all gas companies are required to supply an assigned quota of gas to critical sectors (including electric power) at prices lower than what is obtainable in international markets under the domestic supply obligation operational framework within the Gas Master Plan (GMP). Thus, operators of thermal plants struggle to secure viable gas contracts at the approved price. We believe that deregulating the price of gas in Nigeria is imperative to achieving a viable domestic gas segment. Long-term gas offtake contracts are also required for international oil corporations (IOCs) to conduct sustainable and efficient exploration and production activities.
The electricity transmission challenge is another factor affecting IPPs in NESI. Nigeria’s grid has a wheeling capacity of circa 8,100MW, which is low compared to the nation’s peak electricity demand of 19,798 MW and installed generating capacity of 13,014MW. Thus, if operational generation capacity increases, the transmission infrastructure will become a critical bottleneck in the supply of electricity. This implies that even with an increase in the generating capacity of the grid-connected IPPs, the Transmission Company of Nigeria (TCN) will still be unable to evacuate more than 8,100MW.
This report provides information on the Nigerian Independent Electric Power Production Industry. We have defined independent power plants in this report as those managed by the private sector prior to the privatisation exercise of 2013, thus excluding the PHCN successor generation companies (GenCos), which are also managed by private owners. Our report reviews the size, structure, trends and performance of the Industry; competitive landscape and market opportunities and the regulatory environment.
The following audience has been taken into consideration in the preparation of this report: