Nigeria power sector aid: Study warns foreign incentives can weaken institutions if terms are poorly negotiated amid financial stress

Nigeria must critically assess the terms attached to foreign incentives in its electricity sector to maximise long-term benefits, a new study published in the peer-reviewed Energy Research & Social Science Journal has warned.

Also read: NEMSA ranks top in 2025 PEBEC assessment for power sector safety

The study, titled Energy Transition in the Global South: Donor Bargains and the Future of the Aid Machine, was authored by Monica Maduekwe, founder of PUTTRU, a leading African financial solutions provider to the energy sector.

It examines how aid negotiations affect institutional performance and technical capacity in power sectors across West Africa.

According to the research, countries under significant financial pressure are more likely to accept aid conditions that limit planning and long-term capacity-building.

This, the study warns, “traps power sectors in cycles of reform that look good on paper but deliver little improvement in practice.”

The report further notes that the bargaining process shapes institutional outcomes long after projects conclude.

Poorly negotiated aid can undermine governance systems, weaken institutions, and compromise sustainable electricity development.

“Countries with high debt levels and heavy aid dependence typically have less bargaining power. When financial pressure is acute, governments are less able to resist conditions that may erode institutional authority and coordination,” the study stated.

While some recipient countries benefit from carefully negotiated aid, financial stress often weakens negotiation positions.

This can create a feedback loop where harmful aid conditions reduce institutional capacity, further diminishing the country’s ability to develop and break free from aid dependence.

Maduekwe called on Nigerian authorities and other aid-recipient countries to adopt more strategic approaches to aid negotiations, particularly during periods of fiscal pressure.

Governments are urged to evaluate vulnerabilities, understand leverage, and ensure aid agreements support long-term institutional development rather than short-term fixes.

Also read: FG launches N590bn power sector bond to restore liquidity

The study underscores that careful negotiation of foreign incentives is crucial for building a resilient and sustainable electricity sector in Nigeria and the broader African context.