$2 billion for super grid: Financing light or darkness?

FOR 25 years, Nigeria has pursued electricity reform like a mirage—always visible, never attained. Today, installed generation capacity stands around 13 gigawatts (GW), yet only about a third reaches consumers. The rest drains away through gas shortages, technical leakages, sabotage, and recurring grid collapses—costing the economy between 2 per cent and 3 per cent of GDP annually according to World Bank estimate. In recent days, both Nigerian newspapers and Bloomberg reported that the Federal Government is in advanced talks with China’s Export-Import Bank for a $2 billion loan to build a “super grid” to connect eastern and western industrial corridors. Minister of Power Adebayo Adelabu told Bloomberg the project is “part of plans to decentralise power generation in Nigeria and get heavy commercial users that left the grid to return.” Yet that statement exposes a policy contradiction: the power sector is already decentralised under the Electricity Act 2023.  While the sector undeniably requires capital, absence of collaboration, transparency, accountability, and commercial discipline across the electricity value chain makes a new foreign loan perilous.

This essay reviews the proposed loan through historical, technical, and fiscal lenses and argues that unless it is transparently structured, anchored on the Electricity Act 2023, and tied to measurable outcomes—loss reduction, rural access, and transparent ownership—it risks becoming another debt-for-darkness scheme to be repaid by future generations. Nigerians—citizens, lawmakers, students and civil society must interrogate who benefits, who bears repayment, and what measurable megawatts this new round of borrowing will deliver.

A quarter-century of federal government failure

Between 1999 and 2007, the Obasanjo administration unbundled NEPA, passed the Electric Power Sector Reform Act (EPSRA 2005), and poured billions of dollars into refurbishing generation plants and transmission lines. Yet by 2007, actual generation remained around 2,800 MW—prompting a parliamentary probe into the “missing $16 billion.” In 2013, the Jonathan government privatised eighteen PHCN successor companies for $2.5 billion, backed by bailouts exceeding ₦700 billion. Private ownership was meant to deliver efficiency. Instead, liquidity shortfalls and technical losses deepened.  Under Buhari, the Siemens Presidential Power Initiative (2020) was touted as a digital fix, but funding shortfalls, foreign exchange volatility, and poor governance delayed progress. By 2023, the grid had collapsed more than 200 times in a decade. While installed capacity has grown from roughly 2,800 MW in 2007 to 13 GW today, actual delivery remains stagnant at 4–5 GW due to persistent transmission bottlenecks. Tinubu inherited this quagmire. His fiscal reforms—fuel subsidy removal and foreign-exchange unification—with attendant excruciating effects still being felt daily by Nigerians, have expanded government revenues and boosted allocations across the three tiers of government. Nigerians must now ask: why are these fiscal gains not powering families, farms, and factories—the true lifeblood of industrialisation?

The Electricity Act 2023, initiated under Buhari and signed by Tinubu, devolves generation and distribution to states and private entities. In theory, it ended federal monopoly. In practice, Federal Government continues old habits—central borrowing for central control of the grid, while it has failed to address the Aggregate Technical, Commercial, and Collection (ATC&C) losses of about 40 per cent. Without urgent reform in billing, metering, and feeder automation, a super grid would only deliver inefficiency more expensively.

Borrowing before balancing the books: A risky habit

The proposed $2 billion loan aims to expand Nigeria’s transmission backbone with new 765 kV high-voltage lines to support industrial corridors. On paper, the logic appears sound. The existing 330 kV and 132 kV transmission networks, owned by the federally controlled Transmission Company of Nigeria (TCN), are structurally fragile, poorly maintained, and chronically unstable. Reinforcement could, in principle, reduce system stress and improve reliability.  While reports are unclear as to whether the proposed super grid will involve private-sector participation, past megaprojects suggest limited transparency and weak cost recovery. Yet without addressing the real causes of recurring grid collapses—poor frequency control, gas-supply disruptions, inadequate automation, and weak coordination across the value chain—a “super grid” will merely transmit instability faster and at a higher cost. Under the Electricity Act 2023, state governments already have authority to create Independent Electricity Distribution Networks (IEDNs) integrating generation, transmission, and distribution within their borders. Some states, such as Lagos and Enugu, have begun piloting IEDNs. What is needed for sustainable power expansion are federal–state–private partnerships and regional grid consortia, not another solitary, federally owned megaproject.

Before borrowing abroad, the Federal Government must first plug the domestic leakages. Just three months ago, President Tinubu granted anticipatory approval for a ₦4 trillion bond to settle alleged debts owed to GenCos and DisCos. The Power Ministry claims ₦2.1 trillion represents legacy arrears (2015–2023) and ₦1.9 trillion covers 2024 subsidies. The Nigerian Bulk Electricity Trading Plc (NBET) admits only ₦1.8 trillion of these debts is verified, while the National Assembly revealed that DisCos owe the Federal Government ₦2.6 trillion in unremitted revenues. If these numbers do not align domestically, what justification exists for new foreign borrowing? Until the government reconciles existing liabilities and reforms the full value chain—from gas supply to metering—it will keep borrowing to finance inefficiency.  Past experience should sharpen caution. Chinese-funded projects such as the $5.8 billion Mambilla Hydropower Project (stalled in arbitration) and the $1.2 billion Zungeru Plant (delivered five years late) underscore the dangers of opaque contracting and cost overruns. Nigeria already owes China over $5 billion, its largest bilateral exposure. Adding another $2 billion—when the naira hovers near ₦1,480 per dollar—will only deepen repayment risks.

Why the grid keeps collapsing

Nigeria’s grid collapses are not simply the result of undercapacity—they are symptoms of systemic fragility.  The grid often operates at barely 4 GW on infrastructure designed for 6–8 GW, meaning it is not “overloaded” but unstable due to poor frequency and voltage control. The root causes of these collapses are well known: inconsistent gas supply and payment arrears that starve generating plants; frequent load rejection by DisCos that destabilises frequency; manual grid control with limited Supervisory Control and Data Acquisition (SCADA) coverage; and aged substations with obsolete relays that make voltage regulation nearly impossible. These weaknesses combine to create imbalances that cascade through the network, often triggering nationwide blackouts. Unlike modern grids equipped with automated protection systems, TCN still relies on manual control, outdated relays, and limited Supervisory Control and Data Acquisition (SCADA) coverage. Inadequate maintenance, vandalism, and delayed fault isolation allow small local disturbances to escalate into national outages. To stabilise the grid, Nigeria must invest not just in steel and cables, but in automation, grid segmentation, and redundancy—ensuring localised faults do not collapse the entire system.

Training, real-time monitoring, and coordination between GenCos, TCN, and DisCos are critical. Without this operational backbone, a “super grid” risks becoming a super liability.

*Lessons from Around the World*

Global experience shows that diversified, regionalised, and well-governed grids deliver the highest reliability.

The United States operates three major interconnections—Eastern, Western, and Texas—each managed independently by regional transmission organisations (RTOs) that coordinate power flows and balance supply and demand locally. This structure ensures that a failure in one region does not trigger a nationwide blackout.

The United Kingdom’s National Grid ESO functions as an independent system operator that does not own physical assets but maintains stability through a competitive, data-driven balancing mechanism. Germany’s federal model, meanwhile, allows private operators to function under strict regulatory oversight while efficiently integrating renewables.

China, despite its vast scale, segments its electricity system into five regional grids—East, South, North, Northwest, and Northeast—linked through high-voltage direct current (HVDC) transmission lines. China’s regional segmentation offers valuable lessons in scale management, though its governance opacity underscores the need for Nigeria to prioritise transparency over speed. These models also align with Nigeria’s National Integrated Electricity Policy (2025), which advocates decentralisation and regional cooperation.

Nigeria should adapt these lessons. The Federal Government can collaborate with state governments within each geopolitical zone to co-own regional grids into which various Independent Electricity Distribution Networks (IEDNs) can interconnect and operate. The six regional grids can then feed into a National Super Grid, jointly owned by the Federal Government and regional representatives. Crucially, ownership and operations must remain separate—ensuring that policy oversight is distinct from technical management to achieve efficiency, accountability, and transparency.

*Conclusions*

The proposed $2 billion Chinese “super grid” loan could strengthen Nigeria’s transmission system—but only if it delivers measurable results. For twenty-five years, every “power reform” has ended the same way: huge spending, little light. This time must be different.

Nigeria’s fiscal position makes new borrowing especially risky. Public debt is estimated at ₦149 trillion ($97 billion)—roughly half of GDP—with external obligations near $42 billion. Debt-service consumes nearly three-quarters of federal revenue, while inflation hovers around 25–28 percent and food inflation is 35 percent. Every new dollar must therefore prove its value in measurable megawatts. Borrowing under opaque, contractor-tied Chinese terms is dangerous. It risks mortgaging future fiscal stability for another underperforming project.

Before borrowing again, the Federal Government must balance its books, reform its governance, and prioritise transparency. The unresolved ₦4 trillion bond to settle debts with GenCos and DisCos already exposes a crisis of credibility. Borrowing without first fixing this accounting chaos is not reform—it is recycling failure. Before approving any foreign borrowing, lawmakers should mandate a public audit of the ₦4 trillion power-sector debts and require performance-based disbursement for any new loan.

True progress requires measurable performance: fewer collapses, higher delivery, and broader access. Rural Nigerians—90 million people (IEA/World Bank, 2025) still without electricity—must not be left behind. Power for them is not charity; it is economic infrastructure. Decentralised, community-based energy cooperatives for food processing, cold storage, and irrigation can transform livelihoods far more sustainably than distant megaprojects.

The Electricity Act 2023 already provides the legal and structural foundation for decentralisation. What Nigeria needs now is governance, not grandeur. Until the Federal Government matches megawatts with metrics, borrowing with benefit, and policy with performance, every new loan—whether ₦4 trillion in bonds or $2 billion from China—will remain what Nigerians fear most: another debt for darkness.

•Dr. Salako, Chief Technology Officer at Emakemtos USA Inc, writes in from Texas, USA.

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