By MICHAEL TIDI

Electricity remains a paradox in Nigeria, with abundant energy resources yet persistent darkness. For decades, Nigerians have endured erratic power supply, exorbitant self-generation costs, and unfulfilled promises of a stable grid. Now, the Nigerian Electricity Regulatory Commission’s recent push for a tariff hike has reignited the long-standing debate on cost-reflective pricing and the sustainability of the power sector. While the rationale for tariff adjustments is rooted in economic and regulatory imperatives, the Nigeria Labour Congress has expressed strong opposition, warning of mass protests and a possible nationwide strike.

This standoff underscores a fundamental dilemma. How can Nigeria achieve a financially viable electricity sector without deepening economic hardship for consumers already burdened by inflation and a rising cost of living?

There is no disputing that Nigeria’s electricity market requires reform. According to the National Bureau of Statistics, only 58.2 percent of Nigerian households are connected to the national grid, leaving approximately 41.8 percent without access. The disparity is more pronounced in some regions. While Ekiti State boasts a 79.7 percent connection rate, only about 20 percent of households in Sokoto State are connected. The financial instability of the sector, exacerbated by high technical and commercial losses, has made it difficult for distribution companies to recover operational costs. 

Currently, electricity tariffs cover only about 65 percent of the actual cost of production, with the Federal Government subsidising the difference. This shortfall hinders investment in critical infrastructure, perpetuating inefficiencies and unreliable service delivery.

A well-structured cost-reflective tariff regime, if properly implemented, could attract private sector investment and drive efficiency gains. The Electricity Act 2023 provides a legal framework for market-driven pricing, emphasizing the need for economic sustainability in the power sector. However, economic models cannot be applied in isolation from social realities.

Encouragingly, under President Bola Ahmed Tinubu’s administration, the Minister of Power, Chief Adebayo Adelabu, has taken commendable steps toward addressing these challenges. The Presidential Metering Initiative aims to roll out seven million prepaid meters starting this year, eliminating estimated billing, which still affects 85.2 percent of Nigerian households. This move will ensure transparency in electricity charges and improve consumer trust in the system. Other ongoing initiatives include the Siemens-backed Presidential Power Initiative, aimed at boosting generation, transmission, and distribution capacity.

Additionally, the Global Energy Alliance for People and Planet plans to implement a solar mini-grid programme in Nigeria, targeting the development of 10 gigawatts of mini-grids to improve electricity access, particularly in underserved areas. While these reforms are promising, their benefits must be felt by the average Nigerian before any significant tariff increase can be justified.

A tariff hike in the current economic climate presents serious concerns. Nigeria’s inflation rate remains elevated, real incomes are stagnant, and businesses are already struggling with high production costs. An increase in electricity tariffs, without corresponding service improvements, could push more households into energy poverty, reduce consumer purchasing power, and negatively impact industrial productivity. The Nigeria Labour Congress has labeled the tariff hike as a fraudulent scheme and has threatened nationwide protests. Their resistance reflects deep-seated public skepticism, given that previous tariff increases have rarely led to improved service delivery. This lack of trust is further compounded by frequent grid collapses, poor metering infrastructure, and continued reliance on estimated billing in many parts of the country.

A pragmatic approach is required to balance economic sustainability with social equity. Tariff increases should be phased and conditional on measurable improvements in service delivery, such as better metering, enhanced distribution efficiency, and improved customer service. A tiered pricing model where high-energy users pay market-reflective rates while low-income consumers are protected through a lifeline tariff for essential household consumption could help ease the burden. Nigeria cannot resolve its power crisis solely through grid expansion. Renewable energy solutions such as solar mini-grids and embedded generation projects offer a viable pathway to improving electricity access. The mini-grid initiative is a step in this direction, aiming to bridge Nigeria’s energy gap.

A significant yet often overlooked aspect of power sector reform is the role of state governments. The Electricity Act 2023 empowers states to generate, transmit, and distribute electricity within their jurisdictions. This shift presents an opportunity for states to take ownership of their electricity challenges rather than relying solely on federal interventions. For too long, state governments have channeled their budgets into traditional infrastructure projects like roads and bridges, which, while important, do not drive industrialisation, create jobs, or enhance productivity without a stable power supply. It is time for state leaders to prioritise electricity investments over politically motivated road projects.

State-led power initiatives can stimulate local economies, attract investment, and enhance productivity across key sectors. Lagos State has already demonstrated the potential of state-led power projects through its independent power plants, which provide stable electricity to government institutions. Other states must replicate this model, expanding power generation efforts to cover industrial clusters and residential areas.

Additionally, states should explore alternative energy sources such as solar, hydro, and biomass to complement grid power. Rural electrification projects must be prioritised to ensure that underserved communities are not left behind. State legislatures should pass enabling laws that facilitate electricity generation, attract investors, and establish efficient regulatory bodies to oversee state power projects.

The ongoing dispute between the government and labour unions highlights the need for structured engagement. A consultative approach involving key stakeholders, including consumer rights groups, industry experts, and labour representatives, is essential for developing a tariff policy that balances economic sustainability with social acceptability. Dismissing labour’s concerns outright would be counterproductive, as a nationwide strike could disrupt economic activities and exacerbate existing hardships. A negotiated settlement allowing for gradual, performance-based tariff adjustments, coupled with targeted subsidies for the most vulnerable, would provide a more sustainable pathway.

Nigeria’s energy sector cannot achieve financial viability without reforms, but these reforms must be implemented with a strong emphasis on fairness and social impact. A tariff hike that is not accompanied by measurable service improvements will be perceived as punitive rather than reformative. The power sector is at a critical juncture. A balanced approach aligning regulatory reforms with social equity, performance-driven tariff adjustments, and an aggressive push for alternative energy solutions will create a more sustainable electricity market. Most importantly, state governments must embrace their newfound responsibilities and take decisive action in generating and distributing electricity. If they do, Nigeria will take a significant step toward achieving true energy security, economic growth, and improved living standards for its citizens.

•Tidi, an energy economist and lawyer, wrote from Abuja via: [email protected].