The loan to Transmission Company of Nigeria (TCN) will support construction of 330KV double circuit quad transmission lines and sub-stations across the country, the bank said in a statement late on Friday.
The AfDB funded project will run across seven states and will improve the capacity of power grid where it is most constrained.
Nigeria privatised most of its power sector in 2013 but retained control of its monopoly grid, operated by TCN. Most of the country’s power generation is from thermal power stations that use gas.
The creaking power grid has often been blamed for hobbling growth in west Africa’s largest economy.
AfDB’s acting vice president for Power & Energy, Wale Shonibare said implementing the project would increase evacuation from the south towards the north, where power supply is limited.
The project would also improve power export and regional power system integration to the West African Power pool, especially through Niger and Benin interconnections, he said.
The country’s power output stands at around 4,000 MW, the Nigeria Electricity System Operator has said. Total power generation capacity is about 7,000 MW but the transmission network cannot cope if plants operate at full tilt.
Nigeria’s privatized power sector typically does not use meters to provide invoices, bill collections are low and energy tariffs have remained fixed for three years.
The effect, say industry experts, is that electricity distribution companies recover so little revenue from customers that they pay less than a third of what they owe to generating companies – leaving the sector with ballooning debts.