The Minister of Power, Adebayo Adelabu, has revealed that the federal government is working towards transitioning the electricity sector to a fully cost-reflective tariff regime to address the growing ₦4 trillion debt owed to power generation companies. Speaking at the Mission 300 Stakeholders’ Engagement meeting in Abuja, Adelabu emphasized that this reform is crucial for ensuring the sustainability and bankability of Nigeria’s power sector.
Despite recent tariff increases for Band A customers, many electricity consumers continue to complain about low power supply and frequent payments for faulty installations. The minister acknowledged these concerns but stressed that ending subsidies and moving to cost-reflective tariffs is vital for Nigeria’s economic growth.
As of December 2024, the government owed power companies about ₦4 trillion in unpaid subsidies, with an additional ₦1.1 trillion accrued in the first half of 2025, pushing the total debt to ₦5 trillion. To prevent further debt accumulation, the government plans to phase out subsidies while providing targeted support for vulnerable citizens.
Minister Adelabu outlined priorities including improving power generation by recovering idle capacities, expanding the energy mix with cleaner sources, addressing market liquidity challenges, expanding transmission infrastructure, and stabilizing the national grid to prevent frequent collapses. The ministry is also focused on increasing renewable energy through rural electrification and energy transition initiatives.
Finance Minister Chief Wale Edun, joining via Zoom from Brazil, highlighted that these reforms have already resulted in over a 40% increase in power distribution in the first quarter of 2025, underscoring their importance for job creation and economic development.
Cost Reflective Tariff vs. Allowed Tariff
The proposed cost-reflective tariffs significantly exceed the current allowed tariffs across all consumer bands. For example, Band A Non-MD customers face a cost-reflective tariff of ₦231.79 compared to the allowed ₦209.50, while Band B Non-MD customers would see an increase from ₦68.96 to ₦223.94. Similar substantial increases apply across Bands C, D, and E.
Consumers and advocacy groups have expressed strong opposition to the tariff hike, citing poor service delivery as a major concern. Kunle Olubiyo, President of the Nigeria Consumer Protection Network, argued that increasing tariffs without corresponding improvements in power generation, transmission, or distribution would amount to consumers being exploited.
He pointed out that since 2015, Nigeria’s power generation capacity has only increased by about 400 megawatts, far below the equilibrium level of 5,600 megawatts achieved during the Jonathan administration. Olubiyo urged the government to consider political and economic sensitivities and warned against simultaneous tariff hikes that could have unintended political consequences.
Bode Fadipe, CEO of Sage Consulting & Communications, highlighted liquidity challenges as a key barrier to sector investment and progress. He questioned whether cost reflectivity alone can solve the sector’s problems, noting that many customers paying higher tariffs still receive less than 20 hours of electricity daily.
Fadipe emphasized the need to address broader policy and structural issues in the power sector rather than focusing solely on tariff adjustments. He called for a comprehensive review of the sector’s challenges to achieve meaningful transformation.
Electricity consumers like Abubakar Aliyu from Gwagwalada report receiving less than six hours of electricity daily, with some days experiencing total blackouts. Aliyu expressed skepticism about the DisCos’ ability to improve service delivery despite tariff hikes, warning that increasing tariffs without resolving supply issues would be detrimental.
He urged the government to ensure reliable power supply and proper maintenance before implementing any tariff increases, emphasizing that consumers expect better service for higher costs.
The proposed tariff hike and sector reforms have sparked intense debate, with stakeholders calling for balanced policies that protect consumers while ensuring the financial viability of Nigeria’s power sector. The government faces the challenge of navigating these reforms amid widespread public concern over electricity service quality and affordability.
