During the World Bank-backed Mission 300 Africa Energy Summit in Dar es Salaam, Tanzania, Olu Verheijen, the Special Adviser to the President on Energy, announced the Federal Government’s plans to increase Electricity Tariffs in the coming months. The government aims to address the country’s power sector challenges by aligning electricity prices with the actual supply cost. This move is crucial for ensuring the sector’s Sustainability and attracting private investment. To prevent the inconvenience that might come with the increases, the government also plans to include Subsidies for low-income Nigerians.
Meanwhile, the Special Adviser emphasised the importance of increasing electricity tariffs by nearly 67% to accurately reflect the Power Supply cost. She explained that this adjustment is crucial for financing Infrastructure maintenance and expanding generation and transmission capacity. Due to low prices, the country’s power sector has long suffered from inefficiencies, with Electricity Distribution Companies (DisCos) struggling due to tariffs not covering operational costs. The current subsidy model forces the government to support power companies, making profitability difficult financially.
Both vulnerable consumers and private investment will be addressed.
As a result, this new approach aims to eliminate this dependency by ensuring that tariffs align with the cost of providing electricity. This will, in turn, encourage more Investment in power generation, transmission, and distribution. Private Sector participation is vital to solving this electricity challenge, and the government is positioning itself to create a more investment-friendly environment. Despite the plan, the government has assured Nigerians that vulnerable and low-income consumers will be protected through targeted subsidies. The administration plans to introduce a buffer mechanism to prevent undue financial strain on poor households.
On the other hand, as part of this strategy, low-income households will receive a subsidised 50 kilowatt-hours of electricity per month through direct consumption or voucher-based assistance. This approach reflects a policy shift toward balancing economic reforms with social welfare. While cost-reflective tariffs are necessary for long-term sector viability, ensuring that power remains affordable for the poor is equally essential. The government insists that these measures will create a financially sustainable and socially inclusive system.
$32b investment is planned to improve power supply and grid reliability.
At the Dar es Salaam summit, Nigeria presented an ambitious $32 billion plan to improve energy access and reliability by 2030. Private Investors are expected to contribute $15.5 billion to the initiative, while the rest of the funding will come from public sources, including the World Bank and the African Development Bank. The plan aims to double the number of households connected to the grid annually and increase the share of Renewable Energy in the country’s power mix from 22% to 50% over the next five years. In addition, the government is pushing for a transition to a cost-efficient, market-driven energy sector while maintaining support for the most vulnerable citizens.
Despite the region’s vast energy resources, the country has struggled with power shortages for decades. With an installed capacity of 14 gigawatts, only 8 gigawatts are transmitted nationwide, and a mere 4 to 5 gigawatts are reliably delivered to end consumers. This has led to frequent power outages, forcing businesses and households to rely on expensive generators. Structural issues have plagued the power sector since its privatisation in 2013. Due to public resistance and economic hardship, the Nigerian Electricity Regulatory Commission (NERC) has struggled to enforce cost-reflective prices. Meanwhile, power distribution companies argue they cannot improve service delivery unless they charge tariffs reflecting their actual costs.
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Since taking office in May 2023, President Bola Tinubu has implemented several economic reforms, including the removal of fuel subsidies, a shift to a floating exchange rate, and new Tax Policies to improve Revenue generation. The latest move to reform energy pricing is part of this broader economic agenda. According to his administration, the country’s goal of becoming a $1 trillion Economy within five years requires a reliable energy sector. Verheijen pointed out that the energy policies must align with the economic ambitions. Therefore, the government prioritises power sector reforms to stimulate industrial growth, create jobs, and improve overall economic productivity.