The Federal Government has revealed plans to fully transition Nigeria’s power sector to a cost-reflective tariff regime, a move aimed at ending the unsustainable electricity subsidy system and halting the ballooning ₦4 trillion debt owed to generation companies.
Speaking at the Mission 300 Stakeholders’ Engagement meeting in Abuja, the Minister of Power, Adebayo Adelabu, described the reform as critical to ensuring a sustainable, bankable, and service-oriented energy sector.
Despite a recent tariff hike for Band A customers, many Nigerians continue to lament erratic power supply and poor service, raising concerns over the impact of the proposed cost-reflective charges.
Subsidy Removal Imminent
Adelabu noted that the FG’s outstanding obligations in the sector stem from unpaid subsidies and underpricing of electricity. He confirmed that ₦1.1 trillion was accrued in subsidy payments in the first half of 2025 alone, bringing the total debt to about ₦5 trillion.
“The government is working on a plan to transition to a fully cost-reflective regime while implementing targeted subsidies for the economically vulnerable citizens,” the minister said.
Impending Tariff Hike Across All Bands
The transition would mean the end of blanket electricity subsidies, resulting in increased tariffs across all customer bands. Current figures show a wide disparity between cost-reflective tariffs and the allowed tariffs enforced by the Nigerian Electricity Regulatory Commission (NERC):
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Band A Non-MD: Cost-reflective: ₦231.79 | Allowed: ₦209.50
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Band B Non-MD: Cost-reflective: ₦223.94 | Allowed: ₦68.96
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Band C Non-MD: Cost-reflective: ₦209.32 | Allowed: ₦56.38
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Band D Non-MD: Cost-reflective: ₦164.34 | Allowed: ₦39.67
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Band E Non-MD: Cost-reflective: ₦145.07 | Allowed: ₦39.44
Across board, consumers on lower service bands could see significant hikes under the new pricing regime.
Reform Priorities Outlined
Adelabu said reforms will also focus on:
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Clearing market liquidity issues
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Expanding transmission infrastructure
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Stabilising the national grid
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Scaling up renewable energy access to rural areas
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Encouraging private investment and technical partnership
The minister also announced plans to recover idle generation capacity and reduce dependence on expensive energy sources by diversifying Nigeria’s energy mix.
Consumer Backlash
Reacting to the proposed tariff increase, Kunle Olubiyo, President of the Nigeria Consumer Protection Network, warned that raising prices without improving supply amounts to exploitation.
“There has been no significant increase in generation or distribution capacity despite revenue surges. Since 2015, Nigeria has only added about 400 megawatts, barely improving beyond the 5,600MW recorded during President Jonathan’s administration,” he said.
Olubiyo urged the FG to balance economic reforms with political sensitivity, warning that indiscriminate hikes could backfire on the administration.
Similarly, Bode Fadipe, CEO of Sage Consulting & Communications, stressed that investment, not just tariff hikes, is the key to unlocking growth in the sector.
“We must ask: at what point can we claim the tariffs are truly cost-reflective if sector performance has not matched expectations?” he queried.
Finance Minister Weighs In
Speaking virtually from Brazil, Finance Minister Wale Edun echoed Adelabu’s sentiments, saying that reforms in the power sector are crucial for job creation and economic growth. He cited a 40% increase in power distribution in Q1 2025 as evidence of progress.
Looking Ahead
As the government presses ahead with tough reforms under the Renewed Hope Agenda, public sentiment will likely hinge on the tangible improvement in service delivery and whether targeted subsidies will truly shield the poor from the shocks of market pricing.
