The recurring narrative that Benin, Togo, and Niger owe Nigeria billions of naira for electricity is misleading. The ₦17.45 billion figure cited this quarter is not a debt for power consumed but a residual service charge on a trade that Nigeria disciplined and guaranteed years ago. Under the Eligible Customer reforms of 2017 and the Willing Buyer, Willing Seller framework of 2019, cross-border electricity supply was moved onto direct, guaranteed bilateral contracts. Neighbouring utilities must post letters of credit or bank guarantees before any power flows, ensuring commercial discipline.
What the ₦17.45 Billion Really Represents
The service charge covers regulated fees for the regulator, transmission company, bulk trader, and market operator—about $20 million per quarter. The actual value of the electricity (energy and capacity for roughly 350 megawatts) is settled separately under guaranteed contracts and is much larger. The headline number is only the administrative slice, and even that is being secured: the system operator is moving to back its service charges with guarantees. Any outstanding balance typically involves older government-linked plants on legacy terms, not a foreign default.
The Model That Works: Bilateral Contracts
Nigeria already has a proven model: direct, guaranteed bilateral contracts. On 28 June, 228 megawatts flowed directly from generators to Nigerian industries—steel mills, food processors, and manufacturers—under such contracts. These customers pay reliably, receive steady power, and bypass the distribution network's collection weaknesses. This segment is the healthiest part of the power system and should be expanded urgently, especially in agro-processing zones, commercial hubs, and major cities where creditworthy loads can support cost-reflective, guarantee-backed contracts.
Scaling the Solution at Home
The same logic applies to the domestic market. Most of the ₦6.8 trillion owed to generators stems from weak distribution-to-generation contracts. The regulator's 2024 move to bilateral trading is shifting generators and distributors from the old single-buyer pool to direct, guarantee-backed agreements. By mid-2024, fewer than a third of grid generators had such contracts; the rest supplied on trust, building debt. Completing this transition will close the system's largest leak.
Addressing Internal Losses
Internal losses remain significant. On 28 June, about 399 megawatts were lost within the grid before reaching customers. Downstream, distribution and collection losses of 30–40% cost distributors hundreds of billions of naira quarterly. Solutions include accelerated metering, reinforcing transmission corridors, and combating vandalism and theft. Every recovered megawatt is the cheapest power available.
The annual outrage over the ₦17.45 billion service charge distracts from the real opportunity: scaling the commercial model that already works. Nigeria should focus on expanding guaranteed bilateral contracts into agro-processing zones and cities, extending discipline across the value chain, and closing domestic leaks. The sector's leaders are already on this path; they need support to move faster, not to relitigate a debt resolved years ago.
Figures drawn from NERC market reports and the National Control Centre’s daily load allocation for 28 June; the market operator invoice reflects regulated service charges, not the value of energy supplied.
Tobi Oluwatola is a partner at AP3 Advisory Services and chief executive of TAO Technologies. He advises on the UK PACT Nigeria Energy Programme.
