Can Good Corporate Governance Unlock Power Sector Potential?

Nigeria's power sector has been facing significant challenges, as highlighted by the Minister of Power, Adebayo Adelabu, recently during a press conference in Abuja. The sector is burdened with a substantial debt of N3.3tn owed to electricity-generating companies and gas producers. Moreover, the electricity subsidy for 2024 is projected to reach N3tn, far exceeding the budgeted N450bn. This poses a significant challenge to the government in the wake of the lack of funds.

The operators will have no choice but to pass the cost on to the consumers. With the myriad of challenges confronting manufacturing industries, will they be able to shrug off this additional cost?  What will be the implications on the already over-stretched income of consumers? Was this because of corporate governance failure? Can good corporate practice help in lasting solutions to this intractable challenge in Nigeria's power sector?


A Sector in Myriad of Challenges

The power sector finds itself shackled by a staggering N1.3tn debt to electricity-generating companies and gas producers respectively. This financial burden hampers reinvestment and efficient operations, exacerbating the sector's challenges. The allocated N450bn for subsidy in the budget proves inadequate, falling significantly short of the actual N3tn requirement. This substantial gap places an immense strain on government finances, highlighting the need for a sustainable subsidy model.

Compounding the situation are the reported cases of aging equipment, inadequate gas supply, and limited transmission capacity contributing to frequent grid collapses and an unreliable power supply. These infrastructural inadequacies hinder the sector's ability to meet the growing energy demand. In addition, current tariffs fail to reflect the actual cost of production, discouraging investment and perpetuating inefficiencies. Widespread non-payment of bills and electricity theft further strain the sector's finances and hamper service delivery.


Potential Implications

Passing on the financial burden through tariff hikes could stifle businesses and strain citizens' already stretched incomes. This scenario would further contribute to the economic challenges faced by the population.

With the unreliable power supply hampering manufacturing processes and discouraging new investments, the graven consequence is industrial stagnation, and a cascading effect on economic growth which in turn leads to more Nigeria falling into poverty.

Also, persistent power outages can exacerbate social unrest and hinder national development. Addressing the power sector crisis is not only an economic imperative but also crucial for maintaining social harmony and fostering a conducive environment for development.


Viewing from Corporate Governance Lens

Understanding the role of corporate governance interplay in the power sector will enhance a better comprehension of the challenges and will help in exploring options for resolving the challenges. The nuances are highlighted as follows.

Indebtedness in the Power Sector

The accumulated legacy debt before 2014 amounts to close to N2tn. This indebtedness has severe repercussions on the sector's operations, hindering the payment of subsidies and leading to disruptions in power generation. The roots of this indebtedness are crucial for understanding the corporate governance issues at play.

The legacy debt owed to gas companies indicates a historical mismanagement of financial resources within the power sector. Corporate governance failures, possibly involving inadequate financial planning, transparency issues, and delayed payments, have contributed to the sector's indebtedness. Analysing the governance structures of the involved entities, including electricity-generating companies and gas producers, is essential to uncover systemic weaknesses.


 Sustainability of Power Subsidies

The mismatch between the budgeted subsidy amount and the actual requirements indicates a failure in budgetary planning. Effective corporate governance involves transparent and accountable budgeting processes. An analysis of how budgeting decisions are made within the power sector, including the roles of the ministries of power, finance, and petroleum, can reveal governance gaps that contribute to financial instability.

The Minister compares Nigeria's electricity tariffs and subsidies with neighbouring countries like Ghana, Togo, and Benin Republic. This raises questions about the economic realism of sustaining subsidies at current levels. Examining the economic factors, foreign exchange rates, and cost structures within the power sector provides insights into whether the subsidy model aligns with broader economic realities and global best practices in power sector governance.


Regulatory Framework and Decision-Making

Corporate governance in the power sector is intricately linked to regulatory oversight. The role of agencies such as the Nigerian Electricity Regulatory Commission (NERC) is crucial in ensuring that entities adhere to financial and operational best practices. An examination of regulatory frameworks, enforcement mechanisms, and the effectiveness of oversight bodies can shed light on whether governance structures are robust enough to prevent financial mismanagement.

The tariff structures for power distribution companies (Discos) suggest that the NERC retained the electricity tariffs for 2023, based on government subsidies. This indicates a temporary fix that relies on government support rather than addressing underlying issues.

The collapse of the national grid multiple times, aging machinery, and low capacity to evacuate power highlight the role of regulators within the power sector's ineffective oversight. Analysing corporate governance structures within electricity generating companies, transmission companies, and distribution companies can reveal whether investment, maintenance, and operational decisions are aligned with best practices.

Plausible Courses of Action

Implementing cost-reflective tariffs in a phased manner can mitigate public backlash while ensuring the sector's sustainability. This is in alignment with the need for fair pricing to attract investment and improve efficiency.

Addressing non-payment and theft requires the implementation of efficient metering and billing systems. These systems will promote accountability among consumers and contribute to revenue generation for the sector.

Diversifying the energy mix by investing in renewable sources such as solar and wind can reduce dependence on gas and foster long-term sustainability. This will not only contribute to environmental sustainability but also ensure a more reliable and diverse energy supply.

Strengthening governance and transparency across the sector is crucial to combat corruption and mismanagement. This will ensure the efficient use of resources and enhance investor confidence in the sector.



Nigeria's power sector faces a complex web of challenges, from escalating debts and unsustainable subsidies to operational crises and regulatory dynamics. Addressing these issues requires a comprehensive understanding of the corporate governance nuances within the sector. Regulatory bodies, government agencies, electricity generating companies, gas producers, and distribution companies all play pivotal roles in shaping the governance landscape.

A holistic approach to corporate governance, encompassing financial management, regulatory oversight, and operational efficiency, is necessary to ensure the long-term sustainability and reliability of Nigeria's power sector. As the government and stakeholders work towards resolving the current crisis, a focus on corporate governance reforms will be instrumental in building a resilient and efficient power sector for the future.


Research & Advocacy Department,

Chartered Institute of Directors (CIoD), Nigeria

28, Cameron Road, Ikoyi, Lagos.



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