GAMCO: Power grid solution to Nigeria’s electricity challenge

President Bola Ahmed Tinubu is leaving no stone unturned in his determination to give Nigerians stable power supply to meet both domestic and industrial demands. The newly created Grid Asset Management Company Limited is seen as a necessary step to addressing the intractable power lockjam in the power value chain, writes Group Business Editor, SIMEON EBULU

Nigeria is preparing another attempt to tackle one of its most stubborn economic problems: a power sector that has gulped billions of dollars in investment, yet still struggling to keep the lights on.

The government of President Bola Ahmed Tinubu is proposing a new entity, the Grid Asset Management Company Limited (GAMCO), aimed at reviving underperforming power plants and easing bottlenecks in the national grid. Officials say the initiative could recover about 1,600 megawatts of electricity within two years by rehabilitating existing assets rather than building new ones.

But after more than two decades of reform efforts that have repeatedly fallen short, analysts say the question is less about engineering and more about credibility.

Nigeria’s electricity sector has undergone multiple restructuring efforts since the early 2000s, culminating in the 2013 privatisation of most generation and distribution assets. The reform was intended to attract private investment and improve efficiency across the value chain. Instead, the sector has struggled with chronic financial and operational problems.

Distribution companies have long faced weak collections and tariff disputes, leaving them unable to pay for the power they receive. That has created a persistent liquidity crisis across the system, limiting investment and discouraging lenders.

At the same time, inadequate transmission capacity has prevented existing power plants from delivering their full output to consumers. Nigeria has an installed generation capacity of more than 13,000 megawatts, yet the grid often delivers only a fraction of that to homes and businesses.

For companies across Africa’s largest economy, the result has been routine dependence on diesel generators, raising costs and reducing competitiveness.

Against that backdrop, the government hopes GAMCO can unlock power capacity that is already built, but barely used.

The company would focus initially on three gas-fired plants developed under the National Integrated Power Project — Omotosho, Olorunsogo and Ihovbor — which together have installed capacity of about 1,775 megawatts but currently operate far below potential.

Officials say the new vehicle would address several of the obstacles that have held these plants back, including unreliable gas supply, weak maintenance regimes and the lack of bankable power purchase agreements with creditworthy buyers.

GAMCO would also support construction of a high-capacity transmission line along the Benin–Lagos corridor, one of the most critical routes in the country’s power system, linking generation hubs in southern Nigeria with the industrial and commercial centres of Lagos and Ogun states.

Unlike traditional government agencies, the company would operate as a commercially structured entity whose shares are held by the Ministry of Finance Incorporated on behalf of the federal government.

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Officials say the model is designed to mobilise private investment through project finance rather than sovereign borrowing, with individual assets packaged into ring-fenced projects capable of attracting lenders.

The new structure would work alongside existing power sector institutions, including the Niger Delta Power Holding Company, which owns the National Integrated Power Project plants, and the Transmission Company of Nigeria, which operates the national grid.

Supporters argue that the approach could deliver results faster and more cheaply than building new power plants. Government planners estimate that constructing a new 1,600-megawatt facility could cost more than $3 billion and take up to seven years to complete, while rehabilitating existing plants could deliver similar output in less than three years. Yet the proposal faces a familiar challenge: convincing investors that the underlying problems in Nigeria’s electricity market have been resolved.

Payment risks remain a major concern for financiers, particularly given the financial struggles of distribution companies and long-standing disputes over electricity tariffs.

Previous attempts to restructure the sector have often faltered at the same point as the inability of the market to generate reliable cash flows across the entire value chain.

For GAMCO to succeed, analysts say, the government will need to ensure that improved generation and transmission capacity translates into sustainable revenues, rather than simply adding more electricity to a system that cannot pay for it.

For now, the proposal represents the latest effort in Nigeria’s long-running quest to build a reliable power system.

Whether GAMCO becomes the breakthrough reform that finally stabilises the grid, or another well-intentioned plan that falls short, will depend less on new infrastructure than on the sector’s ability to fix its deep-rooted financial and governance challenges.