Aid dependence undermining Nigeria’s power sector, new research reveals

By Udeme Akpan

To optimise Nigeria’s electricity potential, the country needs to critically examine the terms and conditions attached to foreign incentives coming to the power sector, according to a new study published in Energy Research & Social Science.

The study, focusing on the interdisciplinary links between energy systems, markets, business, and society, spanning topics like energy transitions, policy, climate, and social acceptance, is entitled ‘Energy Transition in the Global South: Donor Bargains and the Future of the Aid Machine.’

The study, authored by Monica Maduekwe, Founder of PUTTRU, examined several West African countries to show how financial stress shapes aid negotiations and how those negotiations, in turn, affect institutional performance in the power sector.

According to the research, countries under heavy financial pressure are more likely to accept aid conditions that reduce their ability to plan effectively, coordinate agencies, and build long-term technical capacity, trapping power sectors in cycles of reform that look good on paper but deliver little improvement in practice.

“Aid becomes costly because of the bargaining process. The terms under which aid is negotiated shape institutional outcomes long after projects end,” she explains.

Maduekwe’s research reveals that not all aid-recipient countries are treated the same and that negotiation tactics, leverage, and processes vary, with financial stress being a decisive factor shaping these differences.

“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 undermine institutional authority, coordination, and long-term capacity. In such situations, donors may impose conditions that appear reasonable in the short term but erode governance systems, weaken institutions, and limit a country’s ability to deliver sustained development outcomes, including reliable electricity.”

The study warns of a dangerous feedback loop: financial stress weakens a country’s negotiating position; weak negotiating positions lead to harmful aid conditions; those conditions erode institutional capacity, and weakened institutions reduce the country’s ability to develop and eventually break free from aid dependence.

“If countries do not pay attention to how aid is negotiated, financial stress can lock them into a vicious cycle where aid undermines the very institutions needed for development,” says Maduekwe.

The study calls on aid-recipient countries, including Nigeria, to approach aid negotiations more strategically, especially during periods of financial stress.

It said governments must assess their vulnerabilities, understand their leverage, and recognise that poorly negotiated aid can compromise long-term development prospects.

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