Nigeria’s drive to expand embedded power generation is creating a new competitive front in the electricity market, as industrial consumers seek more reliable supplies and developers line up projects that could weaken distribution companies’ hold on some of their biggest customers.
BusinessDay’s findings showed the proposed projects spanning Lagos, Abuja and other parts of the country, with proposed generation capacity ranging from a 40-megawatt plant on Victoria Island to a 1,200-megawatt project at Ajebandele and a 1,000-megawatt captive power development at Kwale in Delta State.
The projects differ in size, technology, and commercial purpose, but they share an important implication for Nigeria’s electricity market: large businesses may increasingly have alternatives to relying solely on power supplied through the national grid and their local electricity distribution companies.
‘Rather than allowing the Electricity Act transition to create regulatory uncertainty, we commenced the process of bringing the relevant generation, distribution, embedded generation, off-grid and other applicable operators under LASERC’s regulatory framework,’ Temitope George, the chief executive officer of the Lagos State Electricity Regulatory Commission (LASERC), said.
She added, ‘Powering a megacity like Lagos demands a diversified matrix, combining embedded thermal generation, off-grid solutions, captive industrial power, and commercial solar PV installations.’
What is being built
The nearest project to completion is the Victoria Island plant in Lagos. It is a 40 MW open-cycle gas turbine developed by Elektron Energy, with Wärtsilä as both engineering contractor and equipment supplier. The map shows commercial operation targeted for December 2026.
Victoria Island is home to banks, hotels, corporate headquarters and some of the country’s most expensive real estate. Those customers pay the highest tariffs and are the ones most likely to leave the grid if a dedicated supplier offers a credible alternative.
‘For years, businesses in Victoria Island have had to operate within the constraints of unreliable power, either absorbing the cost and complexity of self-generation or navigating the uncertainty of the grid. Neither model provides the predictability businesses need to plan, invest and grow with confidence,’ Ayomide Oladapo, executive director, business development at Elektron Energy, Ayomide Oladapo said.
Oladapo added, ‘Victoria Island Power changes that equation’.
The Abuja IPP is the largest of the near-term projects. Developed by the Nigerian National Petroleum Company Ltd., it is a 350 MW open-cycle gas plant, also due in December 2026. China Machinery Engineering Corporation is the construction contractor, and GE Vernova supplies the turbines.
Two larger projects are further out. The Ajebandele IPP, developed by Pacific Holdings, would be a 1,200 MW combined-cycle plant, with a Chinese contractor and Chinese equipment. Its start date is listed as ‘to be determined’ and depends on a gas connection.
In Akwa Ibom State, SNEEPCo is developing the Kwale GENCO FZE, a 1,000 MW combined-cycle plant built by POWERCHINA.
Why distribution companies should care
Nigeria’s distribution companies earn most of their revenue from a small share of customers. Factories, shopping centres, data centres and office towers consume far more per meter than households, and they are more likely to pay on time. A distributor that loses a handful of them loses a disproportionate share of its income.
‘Those customers have also learned to live without the grid. Many already run diesel or gas generators, and the cost of doing so is the benchmark any distributor must beat,’ said Aisha Mohammed, a senior energy analyst at the Center for Development Studies.
A dedicated gas plant with firm supply, particularly a combined-cycle unit that uses waste heat to raise efficiency, can often undercut that cost. If it can also compete with the grid tariff, the case for staying connected weakens.
The Kwale project shows the most direct form of that threat. A captive plant supplies its owner or an affiliated customer rather than selling into the national grid. If its output goes mainly to a single user or industrial site, the distributor never sees that demand, and no tariff dispute or network upgrade can win it back.
The regulatory shift
The Electricity Act 2023 removed electricity from the exclusive federal list, allowing states to create and regulate their own power markets. Lagos and several other states have since moved to set up regulators and licence local generators and distributors.
For industrial customers, that creates a path to buy power from a local plant through a licensed arrangement rather than through the incumbent distribution company.
The practical effect is that distribution companies can no longer count on franchise areas to guarantee customers. A plant within the same city, licensed by the state, can compete for the same load.
Gas supply is the main constraint
The projects face real obstacles. Gas supply is the most important. The Ajebandele project’s schedule is tied explicitly to a gas connection, and Nigeria has a history of power plants standing idle because fuel or pipelines were not ready. Any plant on the map that cannot secure firm gas at a workable price will not undercut the grid or diesel.
Foreign-currency costs also matter. Plants buy turbines and services in dollars but earn revenue in naira, and that mismatch has strained earlier power investments. Developers will need contracts that protect them from currency swings, which in turn shapes the prices they can offer to customers.
Timelines are another risk. A December 2026 start date is only weeks away, and large power projects in Nigeria often slip. Investors and customers should treat the dates on the map as targets, not commitments.
What the distributors can do
Mohammed said electricity distribution companies are not without options.
‘They control the wires, and any plant that sells beyond its own fence needs access to a network,’ Mohammed said.
Experts said some distributors may choose to partner with the new generators, offering to wheel power for a fee rather than lose the customer altogether.
Others may invest in the reliability of their own premium feeders, narrowing the quality gap that pushes customers to look elsewhere.
Analysts said how distribution companies respond will depend heavily on their finances. Many distributors are weighed down by collection losses, network damage and legacy debts to generators, and the market operator, as a DisCo in that position has little room to invest in better service, and without better service it has little to offer customers who are tempted to leave.