The Nigerian Economic Summit Group (NESG) has expressed concern that the 2025 budget proposal fails to adequately address critical electricity tariff reforms.
The group warned that this could undermine efforts to attract private-sector investment and improve the sector’s financial sustainability.
In a report titled “2025 FGN Budget Analysis: Can The Budget Deliver a Major Economic Boost” released on Sunday, NESG stated that despite increased allocations to the power sector, the budget does not confront the fundamental challenges of non-cost-reflective tariffs and poor revenue collection that continue to plague Nigeria’s electricity market.
According to the NESG, “the budget does not adequately address electricity tariff reforms, which are crucial for establishing cost-reflective pricing and attracting private-sector investment.”
“Due to non-cost-reflective tariffs and poor revenue collection, many power distribution companies (DisCos) operate at a loss. Without necessary reforms to enhance the sector’s financial sustainability, the impact of increased budget allocations may be limited as power entities grapple with liquidity crises and operational inefficiencies,” the NESG report noted.
Concerns over lack of accountability framework
While acknowledging that the 2025 budget signals a strong commitment from the federal government to improving power sector infrastructure, NESG criticized the lack of a clear accountability and performance monitoring framework.
The absence of such structures, they warned, increases the risk of fund misallocation, project abandonment, and underperformance of key initiatives, NESG noted.
“Without robust monitoring mechanisms, there is a significant risk of fund misallocation, project abandonment, and the underperformance of planned initiatives,” the group emphasized.
NESG stressed that merely allocating more funds to the sector without embedding strong governance, transparency, and accountability practices would do little to resolve the persistent structural challenges.
They pointed out that successful reform must not only involve infrastructure upgrades but must also address policy and regulatory bottlenecks to create an enabling environment for private capital inflows.
Why this matters:
The power sector remains one of Nigeria’s critical infrastructure gaps, with implications for industrial growth, job creation, and overall economic competitiveness.
Analysts have long argued that cost-reflective tariffs are essential for attracting new investments and improving service delivery.
Without correcting the fundamental misalignments in tariff structures and operational efficiency, increased public spending could be ineffective, as power firms would continue to struggle under the weight of debt and liquidity shortfalls.
What you should know
Nigeria’s electricity sector has battled numerous challenges for decades, including insufficient generation, aging transmission infrastructure, and high levels of energy theft.
- Despite several rounds of reforms, progress has been slow, with many DisCos and GenCos (generation companies) heavily indebted and reliant on government bailouts to remain afloat.
- The President Bola Tinubu administration has promised significant reforms in the power sector with the Presidential Metering Initiative, which aims to roll out 7 million prepaid meters nationwide starting this year.
The administration said this was aimed at putting an end to the practice of estimated billing, giving consumers confidence in what they are paying for, and ensuring transparency.
