Nigeria Power Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Nigeria Power Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The power market in Nigeria is expected to grow at a CAGR of approximately 13% during the forecast period of 2022-2027. The COVID-19 pandemic has impacted the distribution of electricity in Nigeria positively. For instance, in Lagos, the largest city of Nigeria, it is observed that 43% of total electricity demand comes from the residential sector. Under the lockdown scenario, there was a sharp increase in residential electricity demand up to 49%. This resulted in power distribution companies facing a shift in electricity demand and changes in energy load allocation. This called for more EPC or modification projects in the power infrastructure. The Nigeria Power Market is largely driven by favourable government policies, and growing inclination towards privatization of power sector which can draw more investment in the sector. However, the absence of proper infrastructure in the power sector with a lack of skilled local labor is expected to hinder the power market in the country.

Key Highlights

• Thermal Power is expected to dominate the power generation market during the forecast period, as more than half of the country’s total power generation is based on natural gas.
• The country is blessed with required natural resources like oil and gas reserves, which assures continuous fuel supply for the power generation sector. Furthermore, Foreign Direct Investments (FDI) is highly promoted by the Nigerian government in the current scenario, which is likely to create tremendous opportunities for the market. Moreover, there is a great demand of electricity from many communities that are dwelling offgrid.
• The government of Nigeria is promoting renewable energy-based power generation in the country. As part of this, Nigerian Electricity Regulatory Commission (NERC) is offering various grants to local companies for setting up renewable energy generation plants, which is expected to render a robust growth to the power sector.

Key Market TrendsThermal Power Expected to Dominate the Market

• The country's thermal power generation share was around 80% in the year 2021 and is expected to have a significant share during the forecast period too, due to Nigeria’s continuous and reliable gas supply to power the gas-fired power plants.
• In January 2021, the federal government planned to add six coal-based power generating plants to the already existing plants by 2037. Moreover, they also fabricated plans to add nine gas-fired power plants, making it a total of 15 power plants, which are expected to be operational by 2037.
• In February 2020, Nigerian National Petroleum Corporation and the United States Trade and Development Agency signed a USD 1.1 million deal for the construction of gas-based NNPC Abuja Independent Power Project. The 1350MW plant is expected to be constructed by the EPC companies General Electric and CMEC (China Machinery Engineering Corporation). The gas supply is likely to be provided by the proposed pipeline Ajaokuta-Kaduna-Kano (AKK).
• Owing to the above points, the thermal power market is expected to ace the power generation sector during the forecast period.

Government support for renewables-based power generation Expected to drive the market

• Nigeria's renewable power generation capacity was around 2153 MW in 2020. The government is currently on a spree to introduce more programs to promote cleaner power generation sources to power the urban as well as the rural swathes of the country.
• Renewable Energy Master Plan (REMP) promotes the deployment of renewables-based power generation systems in the country. As a part of this, in the year 2020, the Nigerian government has launched the Naija Solar Power Project which targeted around 5 million solar-based connections for the communities that are off-grid.
• In April 2021, the same project was launched in Jangefe Roni Local Government Area of Jigawa State. According to the government, these projects are most likely to be implemented in other areas like Edo, Lagos, Adamawa, Anambra, Kebbi, and Plateau in the first phase, and then the entire country will be covered.
• The country is aiming to increase the supply of renewable electricity to meet the electricity demands of rural areas. The Renewable Energy Association of Nigeria (REAN) is encouraging investments in this sector.
• At the end of 2020, hydropower accounted for about 12.5 percent of its on-grid energy in Nigeria. Following the current trend, this sector will witness huge investments, which in turn culminates the growth of the country’s renewable power generation.
• These developments are accountable for the prediction that the renewables-based electricity generation will become a major driver of power sector in the country, in the near future.

Competitive Landscape

The Nigeria power market is moderately consolidated. Some of the major power generating companies include Afam Power Plc., Egbin Power Plc, and Toshiba Corporation; and some of the major transmission and distribution companies include Transmission Company of Nigeria and Abuja Electricity Distribution Company PLC.

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• The market estimate (ME) sheet in Excel format
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