Nigeria’s electricity sector has undergone one of its most far-reaching reforms in recent years. Beginning in April 2024, the Nigerian Electricity Regulatory Commission (NERC) introduced a new era of cost-reflective tariffs, aimed at restoring financial discipline, reducing subsidies, and improving service delivery.
More than a year later, the results are mixed. While the reforms have strengthened sector liquidity and improved revenue assurance, they have not yet delivered the reliable and affordable electricity Nigerians were promised.
Understanding the Reform Framework
The April 2024 tariff adjustment marked a dramatic shift in Nigeria’s pricing model. NERC adopted a service-based tariff system under the Multi-Year Tariff Order (MYTO), grouping consumers into five bands based on the hours of electricity supplied:
• Band A: 20+ hours/day (cost-reflective, ₦209–₦225/kWh)
• Band B: 16–18 hours/day (partially subsidised)
• Bands C–E: 4–12 hours/day (heavily subsidised, as low as ₦40/kWh)
Band A customers represent only 15% of grid users but consume around 40% of total supply, making them the primary target for subsidy removal.
Throughout 2025, NERC issued monthly Supplementary Tariff Orders that further adjusted rates based on:
• Inflation (up to 24.5%)
• Foreign exchange (₦1,610/$)
• Gas prices ($2.13/MMBTU)
• Contribution to the Transmission Infrastructure Fund (₦2.17/kWh)
DisCos such as Jos (₦115.7/kWh allowed), Kaduna (₦113/kWh), and Port Harcourt (₦115/kWh) received updated tariff structures aligned with their operating realities.
The Electricity Act 2023 also strengthened regulatory oversight, empowering states to regulate their own markets and mandating performance-linked pricing. DisCos are now required to publicly report daily supply hours, and feeders failing to meet targets face downgrades and tariff rebates.
Revenue Growth and Sector Financial Gains
From a financial standpoint, the tariff reforms have delivered significant improvements.
Stronger Revenue Mobilisation
Between Q1 and Q3 2025, DisCos collected ₦1.713 trillion, surpassing the entire revenue for 2024. In April 2025 alone, collections hit ₦199.85 billion, representing a 40% year-on-year increase.
Collection efficiency improved to 76.07% in Q2 2025, while billing efficiency rose to 81.61%. ATC&C losses a major obstacle to sector viability fell to 37.92%, a modest but meaningful improvement of 1.69 percentage points.
Remittance performance also strengthened, reaching 95.65%, reducing historical payment shortfalls to GenCos and service providers.
Impact on Generation and Market Stability
Improved liquidity supported higher settlement rates for GenCos and encouraged incremental investments in maintenance and fuel supply. As a result:
• Average generation increased to 5,395 MW.
• Energy offtake climbed to 91.78% of available capacity (3,903 MW).
• Metering reached 54.33%, with over 225,000 meters installed in Q2 2025.
For the first time in years, the grid recorded quarterly stability with no system collapses, though frequency and voltage deviations persisted.
Service Delivery Shortfalls: The Reform’s Weakest Link
Despite financial gains, service performance has fallen short of expectations.
Band A Consumers Are Not Getting What They Paid For
Many Band A feeders continue to receive an average of 10–15 hours, far below the 20-hour threshold tied to cost-reflective pricing. NERC’s enforcement orders have led to feeder downgrades and tariff rebates, but consumers continue to bear the brunt of unreliable supply.
Generation Variability and Distribution Weaknesses
Generation dipped by 4.6% in Q2 2025 (to 9,830 GWh), due partly to reduced gas supply and grid constraints.
Some DisCos still perform significantly below tariff-linked benchmarks:
• Kaduna Disco: ATC&C losses at 70.98% (target: 21.32%)
• Port Harcourt and Enugu DisCos also recorded persistent supply gaps and high complaint volumes.
At Disco Complaints Centres and NERC’s CCU, over 227,000 customer complaints were recorded in Q2 alone, dominated by metering, billing, and poor supply yet resolution rates hovered at just 45.63%.
Economic and Social Impact: High Tariffs, Low Affordability
While the reforms intended to stabilise the sector financially, their social and economic effects have been severe.
Households Face Sharp Cost Increases
Average monthly electricity bills for grid-connected homes rose to ₦34,942, a 98% increase. Many families now spend more on power than on food or transportation, relying heavily on generators when supply falls short.
Impact on Businesses
Manufacturers experienced up to 92% increases in electricity-related expenses. SMEs reported closures, reduced production hours, and mass layoffs. A business climate survey showed:
• 67.5% of firms consider current tariffs unaffordable.
• Over 70% reported switching back to diesel or hybrid energy options.
Safety Risks
Electrical accidents rose to 60 incidents in Q2 2025, resulting in 38 fatalities, underscoring weak network safety standards and inadequate oversight.
Subsidies Still Persist
Although cost-reflective tariffs aimed at eliminating subsidies, government support remains substantial. Major DisCos still receive ₦12–15 billion monthly in subsidies for Bands B–E, placing pressure on federal spending.
Are Cost-Reflective Tariffs Working? A Balanced Assessment
Where They Are Working (Financially):
• DisCos now have better liquidity to pay GenCos and fund network improvements.
• Collection and billing efficiencies have improved.
• ATC&C losses, though still high, are declining.
• Metering and remittances are trending upward.
• Investors and lenders now see a more predictable revenue framework.
Where They Are Not Working (Operationally and Socially):
• Service reliability has not improved proportionately with price increases.
• Consumers in Band A often receive fewer hours than promised.
• Affordability remains a major challenge for households and businesses.
• Network investments lag behind revenue growth.
• Public trust in the reform process is declining.
• The continued reliance on subsidies shows that pricing alone cannot fix structural issues.
In short: the reforms are working financially but not adequately operationally or socially.
What the Sector Needs Next
1. Tie future tariff increases to actual performance
Tariffs should only rise when DisCos meet clear targets for supply hours, metering, remittances, and fault reduction.
2. Publish quarterly ring-fenced spending reports
Consumers need transparency on how tariff revenues are used, including:
• Grid upgrades
• Metering
• Loss-reduction programmes
• Safety improvements
3. Accelerate nationwide metering
A realistic pathway to 100% metering through MAP, NMMP, and state-level schemes is essential to reduce estimated billing abuse.
4. Strengthen consumer protection
Rebates for under-supply must be automatic, and complaint centre performance should be publicly rated.
5. Maintain targeted subsidies for vulnerable customers
A lifeline tariff should be preserved for low-income users until service stabilises.
6. Diversify beyond gas-dependent generation
To reduce volatility in supply, Nigeria must invest aggressively in:
• Distributed renewable energy
• Embedded generation
• State-level mini-grids and franchising models
Conclusion
Nigeria’s tariff reforms have delivered clear financial improvements for the power sector, strengthening liquidity, boosting revenue, and improving remittances. However, the core objective reliable, affordable power for consumers remains unmet.
Cost-reflective tariffs cannot succeed without simultaneous improvements in supply quality, transparency, and accountability. Until households and businesses begin to experience consistent, predictable electricity, the reforms will continue to feel punitive rather than progressive.
If Nigeria pairs financial reforms with stronger enforcement, accelerated metering, and visible service improvements, cost-reflective tariffs can still form the foundation for a sustainable electricity market. For now, they work only partially a step in the right direction, but far from destination.