Nigeria Decoded: Early Actions Signal Tinubu's Aim to Overhaul the Energy Sector and Opportunities for Investors
We’ve been watching Nigerian President Ahmed Bola Tinubu since he won the February 2023 presidential election to understand his vision for running Nigeria and its economy—the largest in Africa. After three weeks in office, we see four key developments, all related to the energy sector:
The end of fuel subsidies, which tripled the price of fuel.
Approval of the 2023 electricity bill that opened the electricity market to independent power producers (IPP) and replaced the more restrictive legislation in place since 2005.
An expensive game of one-upmanship between two billionaires on the Nigerian stock exchange—the competition centered around ownership of shares in a company invested in the energy sector.
Wale Tinubu’s pivot to renewable energy opportunities, especially electric vehicles (EV).
Taken together, these actions signal two things: that Tinubu's first major initiative is to overhaul Nigeria's energy sector and that the contest for stakes in Nigerian energy is taking off in earnest. We also think Tinubu aims to make fixing Nigeria’s energy sector, especially electricity, the signature achievement of his first presidential term.
Tinubu’s decision to focus on energy makes sense. Anemic electricity generation has long hindered Nigeria’s economic growth. Despite investing trillions of naira into the problem, the country still cannot generate enough electricity to power homes—let alone drive industrial growth. Nigerian people and businesses typically purchase or generate their power as a short-term fix, often relying on diesel or petroleum to run generators. In fact, between 2014 and 2019, Nigerians paid about US$ 500 million to purchase generators. This gave rise to a powerful group of businesses that profits by selling generators and the fuel needed to run them. Until now, the “generator bloc” has used its influence to lobby against energy sector reforms, especially those that would reduce reliance on fuel-powered generators.
During his inauguration speech on 29 May, Tinubu upset this system by announcing the end of Nigeria’s longstanding fuel subsidies and plans to redirect funds to infrastructure, education, healthcare, and job growth. In response, the price of fuel—which many use to generate electricity—nearly tripled. Given the reliance of millions of Nigerians on diesel and petroleum for power generation, this price hike created an immediate demand for more affordable electricity.
As one part of his solution, on 9 June, Tinubu approved new electricity legislation that replaced the restrictive Electric Power Sector Reform Act (EPSRA), first signed in 2005 and amended several times since. The new legislation opens the electricity market by allowing states, companies, and individuals to generate, transmit, and distribute electricity—creating opportunities for independent power producers (IPPs), microgrid development, and renewable energy projects.
This is familiar territory for Tinubu. He attempted to purchase electricity from IPPs while serving as Governor of Lagos state (1999-2007). However, at that time, the federal government was under the control of the rival People’s Democratic Party and stifled Tinubu’s plans by blocking several proposed deals. Lagos state arranged for IPPs to sell electricity directly to residential estates, hospitals, and other stand-alone customers as a workaround. Today, many of those IPPs still sell their electricity to Lagos residents at a premium price.
For Tinubu's energy sector overhaul to work, he needs wealthy captains of industry—like billionaires Tony Elumelu (of Heirs Holdings), Femi Otedola (of Geregu Power), and Wale Tinubu (of Oando)—to invest in IPPs and other large energy projects.
In fact, all three men have already taken actions showing their intentions to make a serious play for influence in the energy sector. Less than a month after Tinubu's election victory, Otedola kicked off a game of one-upmanship with Elumelu when he shocked the markets—and Elumelu—by becoming the largest shareholder in Transcorp, a subsidiary of Elumelu’s Heirs Holdings that also owns Ughelli Power Plant. In response, within days, Elumelu upped his shares in Transcorp from 2 % to just over 25 %. Within two weeks, Otedola sold his 6.3 % stake in Transcorp to Elumelu.
With these moves, Otedola reminded Nigeria’s business elite that he was a shrewd and calculating businessperson, not just the creator of his popular Instagram account that had once thumbed its nose at Elumelu for a bad business deal. But it is not only Otedola getting into the game—we expect more moves like this as a growing pool of investors seek to stake claims in the opening energy sector.
Also, Wale Tinubu—an oil magnate and President Tinubu’s nephew and advisor—has begun pivoting toward EV opportunities. One of its subsidiary companies, Oando Clean Energy Limited (OCEL), has started importing electric buses for Lagos state and plans to build charging stations and other EV infrastructure throughout Africa’s most populous city.
We think captains of Nigerian industry are well-positioned to take a first-mover advantage by pursuing new opportunities, especially IPPs and renewables. Some—like Elumelu, Otedola, and Wale Tinubu—have already started moving. Expect more to follow.
There will also be opportunities for foreign investment. Nigerian companies tend to welcome joint ventures. Partnering with domestic companies already experienced in electricity generation could be a good way for foreign investors to enter the market. We’re watching whether Tinubu will use his presidential power to clear obstacles for foreigners advancing energy projects.
There will also be opportunities for small and unconventional investors. For example, the Independent Petrol Marketers Association of Nigeria (IPMAN) announced plans to convert 800 trucks to deliver natural gas instead of petrol. Most power plants use natural gas, which is abundant in Nigeria, making the trucks essential for last-mile delivery to the plants.
Tinubu has ambitious plans, and even within the first weeks of his presidency has made moves to fix Nigeria’s energy sector. We think this will create opportunities for investors. Delivering a solution could transform Nigeria’s economy, much like the telecom era of the early 2000s.
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