• Future generation to inherit $5.7b W’Bank, AfDB loans, other N2.3 trillion debts
• Stakeholders rue fate of consumers, unabating losses
• 160 grid collapses since 2013 cost GenCos N229.6 billion

Burdened by rising inefficiency in the power sector, which has birthed N7.2 trillion in subsidy and other accumulated debts, Nigerian electricity consumers have continued to raise concerns over the multi-year tariff structure of the Nigerian Electricity Regulatory Commission (NERC).

A development, which is harbouring the weaknesses of electricity companies, especially the distribution companies (DisCos) and the Transmission Company of Nigeria (TCN), has led to a shortcoming that may create a daunting task for subnational governments, which are meant to implement cost-reflective tariff structures and a liberalised electricity market under the Electricity Act.

Currently, electricity consumers bear the cost of N50 per kilowatt hour (kWh) for gas supply and N70/kWh as power generation costs while transmission contributes N11/kWh. Distribution cost is N77/kWh, bringing the composite tariff to N208/kWh.

The components being calculated by NERC across the value chain include return on investment, and aggregate technical, commercial and collection (ATC&C) losses of the DisCos, which stood at 39.1 per cent as of the third quarter of 2024.

The ATC&C losses imply that, for every N100 worth of energy the DisCos take, about N40 goes unaccounted for but is still passed on to the consumers.

Since privatisation, the power sector has accumulated over $5.7 billion in debts from the World Bank, African Development Bank and deposit money banks along with an additional N2.3 trillion facility secured from the Central Bank of Nigeria (CBN).

Yet, transmission and distribution capacity remains weak, with consumers paying for poles, wires, meters and transformers, while the power supply remains unreliable.

Meanwhile, NERC’s tariff structure continues to include charges for debt repayment on poorly utilised loans.

While the national grid has collapsed over 160 times since 2013 forcing the generation companies (GenCos) to repeatedly repair their equipment and lose N229.6 billion yearly according to the Association of Power Generation Companies, these costs are also transferred to consumers.

The development, which may worsen if the NERC and the Federal Competition and Consumer Protection Commission (FCCPC) fail to act fast, also places the burden of shrinkage, and transmission losses on the TCN while administration costs are passed to consumers.

Multiple sources told The Guardian that the development shields inefficient electricity companies from accountability, keeping the grid too weak to service manufacturers and other businesses that should be its primary users. As a result, manufacturers and households rely on costly alternative energy, which drives up production costs by over 50 per cent, worsening the price crisis.

Nigeria’s electricity subsidy, increasing at an alarming rate, stood at N225 billion in 2015, increased to N302 billion in 2016 and moved up to N351 billion in 2017.

The trend continued upward, reaching N440 billion in 2018 and N528 billion in 2019. In 2020, the subsidy payment stood at N501 billion, before dropping to N251 billion in 2021 and further declining to N144 billion in 2022.

However, in 2023, the subsidy spiked to N618 billion. The most dramatic increase occurred in 2024, with the government spending a staggering N2.3 trillion. In 2025, the subsidy is projected to hover around N2.2 trillion.

Based on the current tariff set by the NERC, the yearly subsidy for Abuja Electricity Distribution Company (AEDC) stands at N349.2 billion, while that of Eko Electricity Distribution Company (EKEDC) stands at N269.04 billion.
Ikeja Electric (IE) is N320.16 billion and Port Harcourt Electricity Distribution Company (PHED) gets N178.08 billion. Benin Electricity Distribution Company (BEDC) stands at N197.52 billion, while Enugu Electricity Distribution Company (EEDC) gets N193.44 billion.

Jos Electricity Distribution Company (JED) hovers at N153.24 billion, Kaduna Electricity Distribution Company (KAEDC) is N173.88 billion and Yola Electricity Distribution Company (YEDC) is N103.56 billion.

Kano Electricity Distribution Company (KEDCO) stands at N162.96 billion, while Ibadan Electricity Distribution Company (IBEDC) gets N294.6 billion.

In the absence of a bilateral market structure, the Federal Government remained the risk taker of the market shortfall, meaning that the subsidies which have been adding up from previous governments would be paid by taxpayers who in turn didn’t enjoy improved power supply.

Currently, the power sector owes Deposit Money Banks (DMBs) about $1.95 billion. About N2.3 trillion in intervention funds was also taken by the sector from the Central Bank of Nigeria (CBN) in a series of projects which the Nigerian Electricity Market Stabilisation Facility intervention, National Mass Metering Programme, Power and Aviation Intervention Fund (PAIF) and the Nigerian Bulk Electricity Trading Payment Guarantee Facility.

The World Bank provided a $500 million loan for the Nigerian Distribution Sector Recovery Program (DISREP). In June 2023, the World Bank approved today additional financing of $449 million in the International Bank for Reconstruction and Development (IBRD) loan and $301 million credit to further support the performance-based Power Sector Recovery Operation (PSRO). Before that, the bank had approved $486 million for rehabilitation and upgrading of electricity transmission substations and lines.   This brings the total from the World Bank to $1.7 billion.

In July, the African Development Bank Group approved a loan of $500 million under the first phase of the Economic Governance and Energy Transition Support Program (EGET-SP). The bank also funded the $1.6 billion Transmission Rehabilitation and Expansion Programme (TREP). This pushed the electricity funding from the AfDB to about $2.1 billion in recent years.

While the tangible result of the loans is not seen in the power sector with over seven million without electricity meters and unstable power supply even with the involvement of Germany through the $3 billion Nigerian-Siemens power deal, the loans and the accruing repayment cost are passed to consumers.

Each collapse is a circle of loss and downtown that increases operating costs for the DisCos, GenCos and the Transmission Company of Nigeria. Sadly, the burden of the losses, coming from the inefficient TCN eventually becomes a part of the tariff that end-users must pay.

An energy scholar and President of the Nigerian Economics Society (NES), Prof. Adeola Adenikinju, said the current tariff structure does not incentivise efficiency.

He urged regulators to implement a pricing model that rewards DisCos based on their ability to reduce losses and expand their customer base.

“Right now, a small group of consumers is shouldering the burden for a larger population,” he said.

An energy expert, Prof. Stephen Ogajim argues that electricity providers should be allowed to charge fair rates, similar to the telecoms sector.

He emphasises that consumers should pay for what they use, which would encourage energy efficiency and force inefficient operators out of business.

“Competition will either drive them to improve or consumers will seek alternatives, ultimately reducing costs,” Ogaji said.

A professor of energy economics, Prof. Wunmi Iledare, emphasised the need for a fundamental shift in leadership within regulatory institutions, arguing that current tariff structures are more transactional than transformational.

He criticised the existing electricity pricing mechanism, stating that it lacks a strong theoretical foundation.

“It is neither a socially optimal price nor a fair-return price, but a territorial monopoly price driven by economic populism rather than sound economic principles,” he said.

Iledare also warned against subsidies that hinder energy accessibility, affordability, adaptability, and availability, stating that such policies destroy value. He called for a shift from blanket subsidies to targeted incentives that enhance energy security and sustainability.
Electricity Market Analyst, Lanre Elatuyi stated that the government has already signalled its intent to reduce power sector subsidies, as seen with Band ‘A’ customers now paying cost-reflective tariffs.

Elatuyi expects other bands to follow suit, as subsidy payments are no longer sustainable given Nigeria’s fiscal constraints.

He stressed the regulator’s role in protecting consumers from exploitation, insisting that principles of prudence and the “used and useful” rule must be upheld.

“Consumers should not be paying for assets that boost utility companies’ revenues without improving power supply,” Eletuyi said.

He also urged strict scrutiny of capital (CAPEX) and operational (OPEX) expenditures to prevent unjustified tariff increases.

A market analyst and Founder of Empower Consult Africa, Dr Abubakar Ibrahim, noted that electricity subsidies pose a significant financial burden on the government, initially introduced to protect consumers from high costs but are now unsustainable due to rising national debt and competing economic priorities.
Ibrahim warns that continued reliance on government intervention discourages private sector investment and foreign direct investment in the power sector.

For consumers, he says, subsidies often translate to unreliable power due to underinvestment in infrastructure.
To achieve cost-reflective tariffs, Ibrahim suggests a phased approach, starting with targeted subsidies for low-income Nigerians while allowing industrial and high-consumption users to pay market rates. He also calls for investment in solar mini-grids and off-grid solutions to lower generation and distribution costs.

Ibrahim urged NERC to enforce smart meter deployment to curb energy theft and adopt a performance-based tariff model linking price adjustments to improved service delivery.