Every few months, the same headline resurfaces: Benin, Togo, and Niger owe Nigeria billions for electricity. This quarter, it’s about 17.45 billion naira. The narrative stirs indignation—why are we keeping neighbors lit while our own citizens sit in darkness? It makes for a good headline, but on the numbers, it’s a non-story. Worse, it distracts from a far more hopeful one.
Let’s start with what that figure actually is. The payment risk it seems to describe was dealt with years ago. Under the Eligible Customer reforms of 2017 and the Willing Buyer, Willing Seller framework of 2019, cross-border and large-industrial electricity supply moved onto direct, guaranteed bilateral contracts. Neighboring utilities now buy power from Nigerian Generating Companies (Gencos) by posting letters of credit or bank guarantees before a single megawatt flows. This trade runs on surplus capacity, not power taken from Nigerian homes, and is capped at less than 10 percent of grid supply.
So what is the 17.45 billion naira? It’s a residual service charge—the regulated fee covering the regulator, transmission company, bulk trader, and market operator, running about 20 million dollars a quarter. The electricity itself, roughly 350 megawatts, is settled separately under those guaranteed contracts, and that value is larger. The number in the news is the small administrative slice, the one layer not yet fully backed by a guarantee. Neighbors pay this slice to Gencos, who then pay the market operator. Even that gap is closing: the system operator is moving to secure its service charges the same way energy contracts already are. Where a balance lags, it’s usually an older government-linked plant on legacy terms, inside a market mid-transition—not a foreign default.
This is the part worth dwelling on, because it points to what Nigeria should do next. The same commercial discipline that fixed cross-border trade also governs power for our factories. On that same June day, 228 megawatts went directly from generators to Nigerian industry—steel mills, food processors, manufacturers—under guaranteed bilateral contracts. Those customers pay, get reliable power, and sidestep the collection weakness of the distribution network entirely. It’s the healthiest part of the system, without fanfare.
That’s the segment to grow, and urgently, because it doesn’t wait on fixing everything else first. Nigeria can expand commercially-contracted supply on the grid as embedded generation, and off it as captive plants and mini-grids. Start where the money is most bankable: agro-processing zones and staple-crop clusters first, then commercial hubs and big cities. These are dense, high-value, creditworthy loads that can carry cost-reflective, guarantee-backed contracts today. Every megawatt sold this way is paid for—more industrial output, more jobs, and proof to lenders that the model scales.
The same logic can carry into the last and largest corner of the sector. Most of the roughly 6.8 trillion naira owed to generators sits in the relationship between distribution and generation companies. The fix is already in motion: the regulator’s 2024 move to bilateral trading is pulling generators and distributors off the old single-buyer pool onto direct, guarantee-backed contracts. By mid-last year, fewer than a third of grid generators had such contracts; the rest supplied on trust, which is how debt builds. Finishing that transition, patiently and without disrupting supply, so that a distribution-to-generation contract carries the same discipline as an industrial or cross-border one, would close the single biggest hole in the system.
None of this excuses losses inside our own network, and that work matters too. On 28 June, about 399 megawatts—a power station’s worth—was lost in the grid before reaching any customer. The larger loss is downstream, where distribution and collection losses of 30 to 40 percent cost distribution companies hundreds of billions of naira a quarter. Metering, reinforcing weakest transmission corridors, and a serious posture against vandalism and theft are the tools. Every recovered megawatt is the cheapest power in the country. These are being tackled; they should be tackled faster.
So let’s retire the annual ritual of outrage over 17.45 billion naira. Read properly, it’s a modest service charge on a trade Nigeria disciplined and guaranteed years ago—not evidence that neighbors are fleecing us. The more useful truth is that Nigeria already has a model that works: direct, guaranteed, bilateral contracts, proven with international customers and our own industry. The job now is neither dramatic nor punitive. It’s to scale that model into our agro-processing zones and cities, extend it to the rest of the value chain, and keep closing the leaks at home. The people running this sector are, for the most part, already on that road. What they need is for the rest of us to help them move faster along it—not to keep relitigating a debt that was settled, by design, a long time ago.
Figures are 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.
