In his insightful diagnostic, “The Debt That Darkness Built,” published in The Guardian Nigeria on 29 April 2026, Lanre Babalola rightly observes that Nigeria’s power sector crisis is not merely a technical failure of generation or transmission, but a deeper failure of market design and fiscal management. His analysis addresses an issue of profound national importance, persuasively arguing that the sector has evolved into an engine of structural debt. The N6.8 trillion in arrears currently entering public discourse represents only the visible edge of a far larger liability burden.
This exposure—comprising approximately N2.3 trillion in Central Bank of Nigeria (CBN) intervention facilities, multilateral loans tied to underperforming infrastructure, and contingent obligations such as take-or-pay gas contracts—reveals a sector in which government has become an open-ended guarantor of commercial failure. The sequencing envisaged under the Electric Power Sector Reform Act (EPSRA) 2005 faltered because the transitional “single-buyer” model hardened into a quasi-permanent arrangement, shielding market participants from the commercial consequences of technical inefficiency for more than two decades.
From Price-Fixing to Life-Cycle Cost Analysis
To move beyond the circular argument that cost-reflective tariffs alone will resolve the crisis, Nigeria must shift from traditional price-fixing to a Sustainable Engineering Economics Framework anchored in Life-Cycle Cost Analysis (LCCA). Whereas conventional economics focuses narrowly on the unit price per kilowatt-hour (kWh), LCCA evaluates the total cost of energy delivery across the entire operational lifespan of the system.
The stark reality is that when 45 to 50 per cent of generated electricity fails to yield revenue because of technical and commercial losses, the delivery architecture itself is fundamentally defective. Under such conditions, no tariff regime can achieve financial equilibrium. A sustainable framework therefore requires that loss-reduction infrastructure be treated as a technical precondition for market liquidity, making engineering efficiency—rather than tariff escalation—the principal driver of fiscal stability.
Optimization and Strategic Capital Deployment
There is an urgent need to confront the disconnect between Nigeria’s roughly 13,000 MW of installed capacity and the approximately 4,000 MW that actually reaches consumers. This gap can be narrowed through Multi-Objective Optimization (MOO), using computational tools such as Particle Swarm Optimization (PSO) to identify the least-cost, highest-impact pathways for capital intervention.
Rather than accumulating additional debt for new generation assets, capital deployment should be strategically directed towards gas-to-power logistics and grid stability along critical transmission corridors. In this way, every naira borrowed creates a productive technical asset capable of servicing its own debt, thereby narrowing the long-standing gap between sovereign borrowing and actual power delivery.
Quantifying the Hidden Burden
This framework also compels us to quantify the hidden economic burden highlighted by Babalola: the approximately N16 trillion reportedly spent by Nigerians in 2023 on fuel for private generators. By incorporating Social Return on Investment (SROI) into national energy planning, this expenditure is no longer viewed merely as a household coping mechanism; it must be recognised as a large-scale economic inefficiency.
Seen from this perspective, the role of government must shift from acting as a sovereign backstop for systemic failure to implementing a structured mitigation strategy aimed at recovering the estimated 29 billion dollars in annual GDP losses identified by the World Bank. The economic cost of inaction—the continued erosion of national productive capacity—now far exceeds the cost of disciplined, technically grounded intervention.
Conclusion: A Performance-Based Future
Ultimately, Nigeria must replace static sovereign guarantees with risk-adjusted performance metrics. Government support should no longer be open-ended; rather, it should become a diminishing instrument tied directly to engineering milestones. Linking the reduction of sovereign liabilities to measurable declines in Aggregate Technical, Commercial and Collection (ATC&C) losses would restore the commercial discipline that EPSRA 2005 intended but failed to institutionalise.
Such a shift would ensure that, as technical performance improves, the fiscal burden on the state declines correspondingly, creating a self-liquidating debt cycle rather than the self-perpetuating one that currently defines the sector. Without a fundamental restructuring of the commercial architecture through the lens of engineering economics, Nigeria’s power sector will continue to absorb billions of dollars without delivering durable stability.
Written by Engr. Bello Gwarzo Abdullahi, FNSE.
Email: bgabdullahi@gmail.com
