MTN Nigeria has been awarded a licence to develop its own grid-scale power infrastructure in Lagos State, augmenting the energy provision provided on its sites by towercos and ESCOs in the west African country. In three batches The Nigerian Electricity Regulatory Commission (NERC) has issued permits to mini-grid developers who wish to generate, distribute and retail energy for private customers and to major energy consumers that want to generate energy for their own use: MTN Nigeria falls into this latter camp. The move is yet another sign of the innovation meeting the challenges of providing telecom services in Nigeria.
A new energy landscape in Nigeria
MTN Nigeria has plans for four plants generating 15.94MW of energy in Lagos state. NERC has also issued 35.5MW of capacity to SweetCo Foods, African Steel Mills Nigeria Limited, West African Ceramics Limited, Royal Engineered Stones Limited and Armilo Plastics Limited for captive generation, making MTN Nigeria the only mobile operator in Nigeria with plans to generate its own energy.
Aside from MTN Nigeria, SweetCo Foods Limited, African Steel Mills Nigeria Limited, West African Ceramics Limited, Royal Engineered Stones Limited, and Armilo Plastics Limited were permitted to generate captive power. The 15.94MW of planned capacity is enough for 1,000s of sites in Lagos and will enable MTN Nigeria to significantly reduce its reliance on Nigeria’s unreliable power company NEPA once it comes online.
Even before the massive devaluation of the Naira reliable energy was in short supply in Nigeria, but the devaluation and surge in the cost of imported fuel had a major impact on MTN Nigeria and its principal towerco IHS Towers. The two have spent the last year renegotiating their relationship around energy as the towerco sought to de-risk its power exposure. The renewal of 13,500 leases between MTN Nigeria and IHS Towers earlier this month has reset that relationship around power.
MTN Nigeria and IHS Towers new contract structure reduces IHS Towers exposure. The new structure provides a more balanced split between foreign and local currencies and the newly introduced diesel-linked component acts as a hedge of IHS Towers against diesel price and FX fluctuations. This has shifted the risk of diesel price fluctuations onto MTN Nigeria through diesel indexation. Investing and owning more captive generating and distribution assets could enable MTN Nigeria to reduce its reliance on diesel for primary power on its cell sites and at its datacentres.
In other news, MTN Nigeria and other operators have threatened that the continued difficult economic difficulties in Nigeria may lead them to “loadshed” certain services like data and mobile reception in some areas based on scheduled hours unless the situation in the country improves. Nigeria’s Nigerian Communication Commission (NCC) has argued the threat is empty and carriers are merely lobbying for a tariff increase. The period of uncertainty which has clouded the Nigerian telecom sector is likely to continue through 2024 but new approaches to master lease agreements and energy generation signal a bottom may have been reached and a recovery is underway.
