Are Independent Electricity Distribution Networks a viable Solution for Achieving SDG7 in Nigeria?

Nigeria’s power development journey since 2005 reflects an emphasis by the Federal Government on the development of on-grid solutions over other solutions to provide electricity throughout the nation. This is in spite of the fact that on-grid solutions have consistently proven an inadequate and insufficient solution to the problem of blackouts and unreliable electricity. The alternative to on-grid solutions is the introduction of off-grid solutions across the entire electricity supply chain. In the distribution sector, this means developing a well-structured independent electricity distribution network. Considering Nigeria’s Sustainable Development Goals (SDG) 7 commitment, are independent electricity distribution networks (IEDNs) the way to go?

Nigeria’s Current Electricity Distribution Structure

The electricity framework which presently subsists was developed by the FG in 2005 to unbundle the electricity sector and it favors the entrenched distributed networks that supply electricity to massive franchise areas under licenses issued by the Nigerian Electricity Regulatory Commission (NERC). Revenue burdens on the whole electricity value chain are placed on these power distribution companies who are responsible for funding their operations and liabilities as well as remit payments for services provided throughout the value chain. Tariff is centrally determined by the NERC based on several macroeconomic indices which are subject to regular fluctuation. These indices include gas price, local inflation, USD exchange rate, US inflation rate and available generation capacity. Under the multi-year tariff order structure, tariff should be reviewed and updated annually in line with those indicators.

Nigeria’s Electricity Distribution Structure and its Problems 

Nigeria’s current electricity distribution structure has characteristics which happen to also be the bane of the structure:

a. Franchise areas covered under Distribution Licences are too vast to cover all at once and immediately, without steady growth and profitability. Many of the successor-Discos were artificially granted coverage areas without previous experience and with insufficient workplans with no viable paths to profitability. This has proven an unwise
approach to electricity distribution.

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