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Power sector stakeholders have raised concerns over Nigeria’s continued reliance on subsidies in electricity pricing, saying that the approach, though not standard in global tariff planning, has become entrenched in Nigeria without a clear exit strategy, thereby threatening sectoral sustainability.
Lagos State Government has, however, begun consultations toward possible electricity tariff reforms, following lessons drawn from Enugu State’s model, which has recently sparked pushback from power generation companies (GenCos).
At a recent webinar hosted by the Lagos State Ministry of Energy and Mineral Resources, the state’s Commissioner for Energy, Biodun Ogunleye, said Lagos State was keen on studying frameworks that ensure affordability for consumers without destabilising the electricity market.
The session, themed “Sustainable Tariff: A Lesson from Enugu State,” featured key voices across the electricity value chain, including Chairman, Lagos State Electricity Regulatory Commission (LASERC), Abimbola Odubiyi; CEO of LASERC, Dr. Fouad Animashaun; Managing Director/CEO of the Niger Delta Power Holding Company (NDPHC), Jennifer Adighije, and Special Adviser to Enugu State Governor on Power, Joe Aneke.
Ogunleye, who noted that tariff sustainability was crucial to achieving universal electricity access, said: “We cannot run away from tariff conversations, whether at the federal or state level. Our task is to ensure that consumers are not overburdened while the market remains viable.”
The commissioner, while refraining from declaring immediate changes, acknowledged that learning from Enugu State provides useful insights, especially in how states can approach affordability within a decentralised regulatory framework.
Ogunleye questioned the static nature of tariff structures, insisting that just as tariffs can be reviewed upwards due to cost pressures, they can also be reviewed downwards if market conditions improve, particularly with shifts in forex.
He said that the state government would be committed to building a robust and sustainable electricity market that balances affordability for consumers with commercial viability for operators, stressing the importance of data, cost efficiency, and regulatory transparency in tariff determination.
Aneke, who represented Enugu State Government, defended the tariff decision, stressing that the state followed due process in line with the Electricity Act 2023, which empowers sub-national entities to regulate power within their jurisdictions. He said the reduction was based on cost-reflective data and a broader goal to improve service delivery while easing the burden on consumers.
According to him, while a subsidy may be justifiable under certain economic pressures, it should not form the foundation of tariff structures, especially in a sector already buckling under a debt burden of over N4 trillion, largely tied to subsidy claims.
Aneke maintained that Enugu State’s model, which involves state-backed PPAs to determine cost-reflective tariffs, eliminates the need for federal subsidies and ensures financial discipline across the value chain.
He called on the Nigerian Electricity Regulatory Commission (NERC) to “look inwards” and reassess the viability of existing national tariff models in light of emerging state-led electricity markets.
On her part, Adighije, raised concerns about the rising debts owed GenCos, which are already dealing with inadequate gas supply and poor liquidity.
She said that according to the law, the importation of power from the national grid is subject to full regulation by the NERC, which applies to them as a power generation company that is synchronised to the grid.
Adighije insisted that, despite any methodology adopted by states for setting electricity prices, only the national regulator could determine the tariff pricing.
Animashaun, however, raised concerns over the lack of alignment among market participants in the sector, stressing that poor coordination, inadequate consultation, and fragmented data are undermining efforts to build a stable and transparent electricity market.
Odubiyi, who warned against abrupt interventions without understanding market realities, said that if a subsidy is necessary, it should only be on a manageable scale and designed with a clearly defined end date.
