Nigeria’s electricity tariffs are expected to rise in the coming months as the government works toward transitioning to a cost-efficient, cost-reflective pricing model.
This is according to the Special Adviser to the President on Energy, Olu Verheijen.
Verheijen, speaking during an interview in Dar es Salaam, Tanzania with Bloomberg, highlighted the need for higher electricity tariffs to ensure the sustainability of the power sector.
She noted that while tariffs must reflect the actual cost of power supply, subsidies would be maintained to protect low-income consumers.
“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,” Verheijen stated.
“This is needed so the sector generates revenue required to attract private capital, while also protecting the poor and vulnerable.”
Push for Private Investment and Sector Viability
Since assuming office in May 2023, President Tinubu has implemented several economic reforms aimed at reducing the financial strain on the government and creating a more investment-friendly environment.
- These include the removal of subsidies on motor fuel. Now, the administration is looking at electricity tariffs, which were already tripled for some customers last year, to further enhance sector viability.
- Nigeria, a country of about 237 million people, has an electricity access rate of approximately 62%. However, frequent disruptions due to an unreliable grid limit productivity and economic growth. The power sector has been struggling with inefficiencies since the privatization of electricity generation and distribution in 2013.
- Currently, tariffs set by the Nigerian Electricity Regulatory Commission (NERC) do not fully cover the operational costs of power companies, leaving them reliant on government subsidies that make profitability challenging.
Pressure has been mounting from Nigeria’s debt-laden electricity distribution companies, which argue that cost-reflective tariffs are necessary for them to improve service delivery and financial sustainability.
Government’s $32 Billion Power Expansion Plan
Verheijen was in Tanzania attending a World Bank-backed conference where Nigeria presented an ambitious $32 billion plan aimed at improving electricity access and reliability by 2030. The plan envisions significant private-sector involvement, with private investors expected to contribute $15.5 billion, while the remaining funds will come from public sources such as the World Bank and the African Development Bank.
- According to Verheijen, Nigeria’s power industry requires substantial investment to meet its development targets. Out of the country’s 14 gigawatts of installed power capacity, only 8 gigawatts can be transmitted nationwide, and merely 4 to 5 gigawatts are reliably delivered to homes and businesses.
- Germany’s Siemens AG is currently collaborating with the Nigerian government on a $2.3 billion project to modernize power transmission and distribution networks. Meanwhile, decentralized renewable energy projects have already provided access to electricity for over 7 million Nigerians living in rural areas.
- Verheijen emphasized that Nigeria’s energy policies must be aligned with its long-term economic goals. “Your energy policies have to be closely linked with your own ambition for your country,” she said.
“Our own ambition is to be a $1 trillion economy in five years and to move to an upper-middle-income country in 25 years.”
What you should know
In 2024, Nigeria’s energy sector received a total investment of $6.7 billion.
In December 2024, the presidency called on the Minister of Power, Bayo Adelabu, to prioritize the acceleration of the National Mass Metering Programme (NMMP) as part of ongoing efforts to reform Nigeria’s power sector.
