From liquidity to deliverability: The case for bankable transmission investment in Nigeria

From liquidity to deliverability: The case for bankable transmission investment in Nigeria

Nigeria’s telecoms privatisation succeeded because each operator owns and monetises its own infrastructure. Power is different. It depends on a synchronised, shared network where one weak link can disrupt the entire system. Privatising generation and distribution without fixing transmission is like privatising airlines without funding air traffic control. The planes exist, but the landing slots do not.

Nigeria’s power sector privatisation has not yet succeeded because it privatized parts of an interdependent system while leaving transmission—the critical shared backbone—unresolved

Three precedents that prove the model works

The case for bankable transmission concessions in Nigeria is not theoretical. Three precedents, one taken from Nigeria, have demonstrated results in conditions of comparable institutional complexity.

Tariff-Based Competitive Bidding (TBCB): Private Capital Without Privatisation

India did not privatise its national transmission utility, PowerGrid. Instead, it created a concession model in which private developers bid for defined transmission packages under a 35-year Transmission Service Agreement (TSA) with a fixed regulated tariff. The government retains ownership; the developer carries delivery risk.

The model scaled. By March 2024, 106 interstate schemes had been awarded under TBCB, with 53 commissioned and 49 under implementation. Competitive bidding delivered 30–40% cost savings. The fixed 35-year tariff is what makes the revenue stream bankable: lenders can model it, debt can be sized against it, and equity returns are predictable.

Nigeria can apply the same model. TCN can remain the system owner, while priority transmission packages are competitively bid under TSAs backed by ring-fenced wheeling tariffs.

Azura-Edo IPP: The Template Already Exists

The strongest precedent is Azura-Edo, Nigeria’s first true project-financed IPP, commissioned in 2018. Its $900 million financing drew a broad group of lenders and investors.

Azura was bankable not because Nigeria’s sovereign risk disappeared, but because key risks were contractually contained. A World Bank Partial Risk Guarantee (PRG) for payment risk, MIGA political risk cover, a government-backed Put and Call Option Agreement (PCOA) giving investors a credible exit, lender step-in rights and a 20-year PPA. The World Bank Group positioned the structure as a template for future private power deals in Nigeria.

For transmission, the lesson is straightforward – apply the same risk-allocation logic to a different asset class.

PRECEDENT 3 · INDIA (IndiGrid)

Recycling Capital Through an Infrastructure Investment Trust (InvIT)

IndiGrid showed how transmission can become a recyclable asset class. By acquiring commissioned assets from developers, it frees up equity for the next round of projects while giving long-term investors a stable yield vehicle. As of September 2024, IndiGrid owns 20 transmission projects covering 8,600+ circuit kilometres and 17,550 MVA of transformer capacity.

Nigeria could apply the same logic. The pension industry needs long-duration, naira-denominated assets. A transmission InvIT, backed by regulated tariffs and long-term TSAs, could channel that capital into grid infrastructure while giving developers a way to recycle capital and sustain the pipeline. What Nigeria must do differently: Lessons from India’s failures

India’s TBCB experience was not uniformly successful. Even in a more mature institutional environment, four documented risks constrained execution. Nigeria’s starting conditions are tougher, which is why the model must be designed around risks from the start.

“The strongest precedent is Azura-Edo, Nigeria’s first true project-financed IPP, commissioned in 2018. Its $900 million financing drew a broad group of lenders and investors.”

Right-of-Way (ROW): Front-Load or Fail

Only 16% of TBCB projects in India were commissioned on schedule. The primary cause was ROW disputes, land compensation litigation, and environmental clearances. In Nigeria, land acquisition, host community conflicts, and security risks compound the problem. ROW must be fully secured and legally protected before any package goes to bid. Land without title (free from encumbrance) is not a bankable asset.

Nigeria can borrow India’s commercial model, but not its institutional depth. The sequencing implication is clear: every execution enabler must be frontloaded from the start.

Hyper-Competitive Bidding: Build in a Tariff Floor

India repeatedly saw developers win with unsustainably low tariffs and then fail in execution. Nigeria should guard against the same risk by setting a technically justified tariff floor and disqualifying below-cost bids. A bid that looks cheap but cannot be financed is worse than no bid.

Coordination Failure: Govern It Before You Need It

India’s interstate TBCB performed better than its intrastate model, where fragmented regulation and inter-agency disputes undermined execution. Nigeria faces the same risk. NETAP exposed coordination failures across TCN, DisCos, and GenCos, and the recent addition of state regulators to the mix further increases the complexity. The lesson is clear: inter-agency governance must be structured before award, not during execution.

Equipment Lead Times: Build into Timeline

Global lead times for transformers and HV switchgear now run 18-36+ months. For Nigeria, FX volatility, port logistics, and customs delays make the risk even worse. TSA milestones must reflect a realistic procurement timeline and not be discovered as critical path problems after financial close. Five Conditions for Bankable Transmission Investment

Taken together, these precedents and risk lessons point to five conditions Nigeria must have in place to attract private capital into transmission and execute at scale.

1. Predictable Ring-fenced Revenue

Wheeling tariffs must be fixed, enforceable and paid through a protected escrow waterfall. Without revenue certainty, there is no project finance.

2. Competitive concession with clear risk transfer

Projects should be bid as defined concessions lots under TSAs. Government keeps asset ownership; concessionaires take delivery risk.

3. Multilateral Credit Enhancement

A World Bank PRG and MIGA political risk cover can help de-risk the first pilot concessions and unlock lower-cost capital.

4. Enforceable performance discipline

KPIs, penalty regimes, lender step-in rights, pre-cleared ROW, and host community agreements must be in place before award.