Nigeria: “Nigeria’s Energy Landscape Transforms as 11 DisCos and GenCos Navigate Direct Power Procurement Agreements”

Nigeria: “Nigeria’s Energy Landscape Transforms as 11 DisCos and GenCos Navigate Direct Power Procurement Agreements”

By Ahmad Hadizat Omayoza, Mamos Nigeria

In a significant development within the Nigerian energy sector, eleven Electricity Distribution Companies (DisCos) and Electricity Generation Companies (GenCos) are currently engaged in negotiations aimed at formalizing agreements for the direct procurement and sale of power to consumers across the country. This strategic move is a departure from the existing system where the Nigerian Bulk Electricity Trading Plc (NBET) acts as an intermediary, procuring power in bulk from Independent Power Producers (IPPs) and GenCos for resale to DisCos, eligible, or international customers.

The paradigm shift comes as a result of a new regulation or order sanctioned by the Nigerian Electricity Regulatory Commission (NERC). Under this directive, NBET, which traditionally functioned as a “pool” administrator for the Nigerian electricity market, is deemed no longer relevant. The electricity market has matured, allowing for a transition to a model where DisCos and GenCos engage in direct bilateral agreements for power procurement and sales.

Dr. Joy Ogaji, Chief Executive Officer of the Association of Power Generation Companies (APGC), highlighted the evolution of the market, emphasizing the need for bilateral contracts between GenCos and DisCos, backed by appropriate securitization and guarantees. She expressed optimism that, with a robust framework and effective monitoring, the sector will witness liberalization and surpass set targets.

Acknowledging the impact of this directive, Deolu Ijose, Managing Director/CEO of Benin Electricity Distribution Company Plc, stressed the urgency for all DisCos to explore bilateral power procurement, including the incorporation of green energy, to address the existing supply-demand gap.

However, amidst this transition, pricing remains a significant concern. Stakeholders are awaiting a tariff reset from NERC to facilitate efficient operations under the new regime. Tinuade Sanda, Managing Director of Eko Electricity Distribution Company, affirmed that the directive had been issued previously, calling for bilateral sale and purchase in 2023. However, due to challenges such as forex escalation and the inability to reset tariffs, the implementation was delayed.

As the energy sector undergoes this transformative shift, stakeholders are navigating the complexities of pricing structures and regulatory adjustments, anticipating a more liberalized and dynamic electricity market in Nigeria.

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