Dr. Lanre Babalola has done the country a service. His diagnosis of Nigeria's electricity sector—that the publicly-discussed N6 trillion in arrears is the visible portion of a much larger consolidated sovereign exposure, and that the underlying disease is a commercial architecture that systematically generates debt as a structural output—is correct, important, and overdue. As one of the principal architects of the 2005 reform, his willingness to name the unfinished journey of that reform, rather than defend its execution, is the kind of intellectual honesty the policy conversation has needed for some time.
This response is offered in the same spirit, and from an adjacent vantage point. I write as a structural engineer who has spent three decades at the intersection of design, regulation, and digital infrastructure—including eight years building the National Identity Management Commission into a system that today carries over 100 million records. The vantage point matters because it suggests an observation Dr. Babalola's article approaches but does not name explicitly: the failure of the post-2005 electricity market is, in significant part, the failure of an engineering analysis that was never commissioned. The arrears trajectory was not a shock. It was the stationary solution of the market's governing equations under the boundary conditions chosen at commissioning.
What the article gets right, and what it leaves implicit
The piece's most valuable contribution is the shift in framing. The Nigerian electricity problem is routinely described as a deficit problem—too few megawatts, too little gas, too much load-shedding. Dr. Babalola correctly relocates the problem upstream of the asset layer, into the commercial architecture: gas exists, plants exist, what is missing is the creditworthiness that would attract fuel to those plants reliably. Operational generation hovers between 4,000 and 5,000 megawatts against installed capacity of approximately 13,000 megawatts because the market cannot pay for what the assets could produce. That is a structural diagnosis, and it is the right one.
The taxonomy of liabilities is equally welcome. The article correctly distinguishes between the headline payment arrears, the CBN intervention facilities of approximately N2.3 trillion disbursed between 2015 and 2023, the warehoused pre-privatisation liabilities of the former national utility, the sovereign loans drawn from the World Bank and the African Development Bank, and the contingent obligations embedded in power purchase agreements and take-or-pay gas contracts. The call for a single consolidated public account of the sovereign's full exposure to the electricity sector is the most actionable recommendation in the piece. It should be heeded.
What the article leaves implicit, however, is the question of how a reform of such consequence was commissioned without the analytical instrumentation that would have made its trajectory predictable in advance. Dr. Babalola observes, almost in passing, that there was “no consolidated liability tracking framework” and “limited early-warning mechanisms as payment shortfalls began to mount.” That sentence describes, in plain terms, the absence of basic engineering instrumentation on a coupled techno-economic system of national consequence. It is the central observation of this response.
The reform was an engineered system, designed without engineering analysis
The Electric Power Sector Reform Act of 2005 created what is, in technical terms, a coupled multi-physics system. Electrons flow downstream from generation through transmission to distribution and to the customer. Naira flow upstream in the opposite direction, from the customer back through distribution, through the central buyer, and to generators and gas suppliers. The two flows are coupled through tariff, metering, billing, collection, and settlement. The system has feedback loops, time delays, capacity constraints at every node, leakage at every interface, and stochastic disturbances—foreign exchange shocks, fuel price volatility, demand variation, equipment failure—acting on it continuously.
Any engineer commissioning a coupled system of this character would, before signing off on its design, perform at minimum the following analyses:
Steady-state mass and energy balance
If 45 to 50 per cent of generated electricity does not produce revenue—a figure that was empirically observable from the operating records of the predecessor utility long before 2013—the steady-state cash-flow balance of the network can be computed deterministically. The arrears accumulation rate of approximately N200 billion per month is not a surprise. It is the steady-state output of the network under those leakage coefficients.
Single-point-of-failure analysis
Concentrating offtake risk at one government-owned node—the central buyer—with sovereign indemnities behind it, creates an unbounded liability accumulator. This is the market-design equivalent of a structure with one critical load path, no redundancy, and no fuse. No chartered structural engineer would certify such a design for occupancy. The 2005 architecture certified it for the entire national economy.
Causal-loop and feedback-stability analysis
The gas-to-power creditworthiness spiral the article describes is a textbook positive feedback loop: low payments lead to gas being rationed away from power, which leads to lower generation, which leads to lower distribution revenue, which leads to lower payments. A first-year systems-engineering student, given the empirical loop gain, would conclude that the loop is divergent rather than self-correcting. Such an analysis does not appear in the publicly available reform documentation.
Stress and reliability analysis
Run the system forward under realistic disturbances—a naira moving from N150 to N1,500 to the dollar, double-digit inflation sustained over a decade, gas-price liberalisation, demand growth outpacing transmission expansion. The fan chart of fiscal exposure under any reasonable disturbance set would have shown an alarmingly fat upper tail well within the design life of the reform. This is standard practice in offshore structural engineering for fatigue and extreme-event loading. It was not standard practice for the EPSR Act.
Reliability-based design
In structural engineering we do not ask whether a structure will work in the design case. We ask what its probability of failure is across the joint distribution of loads and resistances over its design life. The corresponding question for the post-2005 market is: what was the probability that distribution-company collection efficiency would reach the levels the reform implicitly assumed within the assumed timeframe? A Bayesian prior built from comparable utility data across sub-Saharan Africa would have placed that probability low. The reform proceeded as if it were near-certain.
None of these analyses requires exotic methods. They are the routine instruments of systems engineering, available in any competent engineering school's curriculum and applied as a matter of course to any coupled system of comparable consequence. They were not applied to the 2005 reform because the reform's intellectual centre of gravity was in regulatory economics, market design, and law—disciplines that reason rigorously about equilibria and incentives, but not about transient dynamics, failure modes, or instrumentation. Economists model steady states. Engineers model what happens during the transient and at the tails. The 2005 reform was a steady-state design with no transient analysis.
The three layers where engineers were not in the room
The Nigerian power sector is not a sector that lacks engineers. It is a sector in which engineers were confined to the asset layer—designing plants, lines, substations, protection schemes—while three layers above them were handed to non-engineering disciplines. The result is a textbook integration failure: each subsystem performs adequately in isolation, the integrated system does not.
The architectural layer
The choice between bilateral trading and a transitional single-buyer arrangement was framed in the reform debate as a market-design question. It is, equally and perhaps primarily, a systems-engineering reliability question. Single-buyer architectures fail closed, because the single node concentrates all risk at one point that cannot be bypassed. Bilateral architectures fail gracefully, because risk is distributed across many buyer-seller pairs and a single failure does not propagate to the whole. Posed as a reliability question rather than a market-design question, the choice between the two architectures has a clear answer, and the answer is not the one the reform settled on as a transition that subsequently became permanent.
The commissioning and acceptance layer
No structural engineer signs off on a building without a load test, an acceptance protocol, and explicit performance criteria. No process-plant commissioning concludes without instrumented runs against design thresholds. The 2013 privatisation had no equivalent. Distribution companies were transferred to new owners without acceptance criteria for collection efficiency, without trajectory targets for aggregate technical, commercial, and collection losses, without metering rollout milestones tied to consequences for non-compliance, and without a defined regulatory response to systematic underperformance. A privatisation conducted on those terms is, in engineering language, a handover without commissioning. The asset is in service. Whether it works is somebody else's problem.
The operational telemetry layer
A sector that accumulates N200 billion in monthly arrears for over a decade, while no consolidated dashboard of sovereign exposure is visible to the Minister of Finance, the Governor of the Central Bank, and the President, is operating without instrumentation. Every refinery, every offshore platform, every transmission tower of consequence in this country has continuous monitoring against design thresholds, and a defined response when thresholds are breached. The electricity market—a system whose failure costs the economy approximately 29 billion United States dollars every year, on the World Bank's estimate—was commissioned and has run for two decades without the equivalent of strain gauges, accelerometers, or settlement monitors. No competently engineered system is permitted to operate that way. This one was.
What this means for the bond programme, and for what comes next
The Federal Government's commitment to a bond programme of up to N4 trillion is, as Dr. Babalola rightly notes, the largest financial intervention ever made in the sector. It is necessary. It is also, on its own, insufficient, and the engineering reading of the system explains precisely why. Settling the stock of arrears without remediating the flow conditions that generated those arrears is the equivalent of pumping a flooded basement without repairing the breach. The water level recedes briefly. The breach continues to admit water at the rate it did before. The pumping must continue indefinitely, or the basement floods again.
A credible response, on the engineering reading, must operate at all four layers simultaneously: settle the accumulated stock through the bond programme, repair the flow at the architectural layer by activating the bilateral trading the 2005 reform mandated and never delivered, install the commissioning instruments at the distribution layer that the privatisation omitted, and stand up the operational telemetry that a system of this consequence should have carried from the day it was commissioned. Without the second, third, and fourth, the first is a transfer of the sector's structural shortfall onto the sovereign balance sheet in a different instrument, which is exactly what the CBN intervention facilities, the warehoused legacy liabilities, and the multilateral sovereign loans have collectively been doing for over a decade.
A modest proposal: An engineering audit function for sector reform
The lesson of the post-2005 experience is not that the reform was wrong. The lesson is that reforms of this consequence cannot be commissioned on the basis of legal drafting and economic argument alone. They are engineered systems and require engineering analysis as a precondition for enactment, in the same way that major construction projects require structural review and major industrial projects require process safety analysis.
I would propose, for serious consideration, a statutory requirement that any sector reform of comparable scale—electricity, water, transport, telecommunications, digital identity—undergo a documented systems-engineering review before enactment, conducted by a qualified panel and lodged with the National Assembly alongside the regulatory impact assessment. The review would model the proposed system, run sensitivity and stress analyses against realistic disturbances, identify single points of failure and divergent feedback loops, specify the operational telemetry the system requires, and define the acceptance criteria against which its performance will be measured.
This is not a novel suggestion. Environmental impact assessment is an analogous instrument, codified in statute and required as a precondition for major projects. There is no good reason that techno-economic systems of national consequence should face a lower analytical bar than environmental ones. Indeed, on the evidence of the past two decades, the case for the engineering review is the stronger one.
In closing
Dr. Babalola's article is a candid and important contribution from one of the architects of the reform he is now subjecting to scrutiny. It deserves the wide reading it is receiving. The argument I have offered here is intended as a complement, not a contradiction. The diagnosis Dr. Babalola has set out is correct. What I have tried to add is an account of why the diagnosis was not made earlier, when the cost of remediation would have been lower by orders of magnitude, and what changes to our governance of major reforms would make a comparable failure less likely the next time.
Nigeria does not lack engineers. It lacks the institutional habit of bringing them into the room when the architecture of national systems is being designed. The cost of that habit, on the evidence of the electricity sector, now stands at over N6 trillion in visible arrears, an unspecified additional sum in consolidated sovereign exposure, approximately 29 billion United States dollars in annual economic loss, and N16 trillion spent in 2023 alone on the petrol and diesel that Nigerians burn to compensate for a public service that should quietly and reliably underpin the economy. That is the price of the engineering analysis that was not done. It is also, on a reasonable reading, the budget against which any future engineering audit function should be evaluated. No romance, no maneuver.
Abubakar is a chartered structural engineer with four decades of experience at the intersection of structural design, digital transformation, and information technology. He is the Deputy President of the Nigerian Institution of Structural Engineers, Principal Partner at Integrated Engineering Associates, and former Director-General and Chief Executive of the National Identity Management Commission. He continues to serve as an Ambassador for ID4Africa.
