The Nigerian government is preparing to adjust electricity tariffs to better reflect the actual cost of power generation and supply, a move aimed at ensuring financial sustainability within the sector.
This development was confirmed by the Special Adviser to the President on Energy, Olu Verheijen, during an interview with Bloomberg in Dar es Salaam, Tanzania. Verheijen stressed the importance of aligning electricity pricing with the real cost of supply, while maintaining subsidies to shield low-income households from excessive financial strain.
“One of the key challenges we’re looking to resolve over the next few months is transitioning to a cost-efficient but cost-reflective tariff. This is needed so the sector generates revenue required to attract private capital, while also protecting the poor and vulnerable,” Verheijen stated.
Since assuming office in May 2023, President Bola Tinubu has pursued economic reforms aimed at reducing government expenditure and fostering private sector-driven growth. These measures have included the removal of fuel subsidies, and now, the focus has shifted to electricity pricing, which had already been tripled for some consumers in 2023.
Nigeria, home to approximately 237 million people, has an electricity access rate of about 62%. However, persistent grid failures have hampered productivity and economic growth. The sector has struggled with inefficiencies since the privatisation of electricity generation and distribution in 2013.
Currently, electricity tariffs regulated by the Nigerian Electricity Regulatory Commission (NERC) do not fully cover the operational expenses of power companies, leaving them reliant on government subsidies. This financial imbalance has made it difficult for energy firms to remain profitable, prompting increased calls for cost-reflective pricing to enhance service delivery and long-term sector stability.
At a World Bank-backed conference in Tanzania, Nigeria presented an ambitious $32 billion investment plan to improve electricity access and reliability by 2030. The proposal seeks to attract $15.5 billion from private investors, with the remaining funds expected to come from public financing sources, including the World Bank and the African Development Bank.
Verheijen emphasised the urgent need for large-scale investment to revamp Nigeria’s power infrastructure. Although the country has an installed capacity of 14 gigawatts, only 8 gigawatts can be transmitted through the grid, with just 4 to 5 gigawatts consistently delivered to consumers.
Germany’s Siemens AG is currently working with the Nigerian government on a $2.3 billion initiative to upgrade transmission and distribution networks. Meanwhile, decentralised renewable energy projects have extended electricity access to more than 7 million people in rural areas.
According to Verheijen, Nigeria’s energy strategy must align with its long-term economic goals. “Energy policies should directly support national ambitions,” she explained. “Our target is to reach a $1 trillion economy within five years and transition to an upper-middle-income nation in the next 25 years.”
The planned electricity tariff adjustment is expected to reshape Nigeria’s energy landscape by encouraging private investment while ensuring affordability for the most vulnerable citizens.
