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| Adebayo Adelabu - Nigeria Power Minister |
Nigeria’s new Power Minister, Adebayo Adelabu, has told the country that it can no longer afford to subsidize electricity. He said the government must remove the subsidy and allow cost-reflective tariffs – meaning consumers would pay rates closer to the true cost of power. Adelabu spoke after a meeting with power generators in early May 2025, warning Nigerians to brace for higher bills. He noted that Nigeria’s economy “cannot sustain subsidies indefinitely,” though the government will still target help for the poorest households.
Electricity subsidies in Nigeria have been large. According to official data, the Federal Government paid about ₦762 billion as electricity subsidy in the first four months of 2025 – roughly ₦200 billion each month. Those reports show the subsidy ran about ₦178 billion in January, ₦194 billion in February, ₦192 billion in March, and ₦194 billion in April. Electricity regulators say the government still covers about half of the cost-reflective price for many consumers (Bands B–E), while only the wealthiest (Band A) pay a higher rate of roughly ₦209 per kWh. In practice, this meant poorer Nigerians paid as little as ₦63/kWh while the government made up the rest.
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| Broken electricity pillar in Nigeria (illustration of grid challenges). |
How Nigeria’s Power Subsidy Worked
For years Nigeria’s government paid the difference between the cost of supplying power and the price consumers paid. This “electricity subsidy” meant that many Nigerians enjoyed low bills, but public funds covered the shortfall. DisCos (distribution companies) charged low tariffs, and the government sent subsidy payments to generation companies to keep the lights on.
In recent years this system grew very expensive. Government documents and press reports show that subsidy spending ballooned. By 2024, Nigeria was spending trillions of naira per year on electricity support. For example, government records suggest yearly subsidy costs could reach around ₦2.4 trillion (after a 269% rise) if large users stayed subsidized. A regulator’s Multi-Year Tariff Order in November 2024 even calculated that the cost-reflective tariff was about ₦231/kWh for the highest-use customers, while the allowed (subsidized) rate was ₦209/kWh. The ₦22/kWh gap was being paid by the government.
By April 2024, the government began moving away from universal subsidy. It removed the richest category of consumers (Band A) from subsidy support. Adelabu noted that continuing to subsidize those users would have pushed annual subsidy bills to ₦2 trillion. He backed an earlier regulator move that hiked the tariff for Band A by 300% (from ₦68 to ₦225, later adjusted to ₦209) so that they would pay nearly the full cost. Even so, reports show the government still spent about ₦200 billion monthly in late 2024 to keep power tariffs low for the rest of the country.
The huge subsidy meant problems. Nigeria has a large population with millions of households and businesses. But power supply has remained poor: high costs didn’t translate into reliable electricity. Many Nigerians ran generators or went long hours with no power. Critics argued that subsidy payments were mostly helping those with electricity access – often wealthier urban homes and firms – rather than the poorest who often had little or no service. The government itself admits much of the subsidy went to the richest 25% of citizens, according to a presidential adviser.
Why Subsidies Are Being Cut
Adelabu and other officials say the subsidy system is simply unsustainable. With Nigeria’s fiscal pressures, fueling subsidies on fuel and power has become a heavy burden. Finance data cited by regulators showed electricity subsidies reaching ₦762 billion in just four months of 2025. At nearly ₦200 billion per month, this spending squeezes public funds for schools, hospitals, and other needs.
Energy experts and analysts agree that the current subsidy model drains government coffers. A Reuters report noted that Nigeria was spending about ₦200 billion ($125 million) per month on power subsidies when tariffs were below commercial levels. That report adds Nigeria achieved a 35% subsidy reduction after last year’s tariff adjustment, which freed up money for other uses. Adelabu himself said the “targeted tariff adjustment” lifted sector revenue by ₦700 billion, cutting the annual power sector shortfall from ₦3 trillion to ₦1.9 trillion.
Finance-wise, ending subsidies also helps pay overdue bills. Nigeria’s power companies (GenCos) are owed over ₦4 trillion in back-payments and loans. This debt grew because distributions companies couldn’t collect enough from customers. Without subsidy removal, experts warn GenCos face collapse. Adelabu and the government now plan to clear this debt partly in cash and the rest with promissory notes. But such fixes require more tariff revenue going to power companies, which means consumers must pay higher prices.
In sum, the removal of electricity subsidies is driven by economics. The government argues it must redirect funds to stabilize the sector and other national needs. At the same time, officials like Adelabu promise to still help poor Nigerians through “targeted subsidies” – for example, crediting power costs of hospitals or schools, or direct payments to vulnerable groups – instead of broad support for all customers.
What Are Cost-Reflective Tariffs?
A cost-reflective tariff is one that covers the full cost of providing electricity – generation, transmission, distribution and maintenance – without needing government support. In practical terms for Nigeria, it means raising customer prices closer to what power companies actually need to stay afloat.
Under the old system, many Nigerians were paying only a fraction of the cost. For example, the electricity regulator reported in early 2025 that the actual average cost of electricity was about ₦116 per kWh, but consumers on average paid only ₦88 per kWh – a subsidy of nearly ₦28 per kWh from the government. This gap is what must be closed under cost-reflective pricing.
Adelebu told generators that **“citizens must pay the appropriate price for the energy consumed”**. In concrete terms, the regulator’s April 2025 tariff order increased prices. Band A customers (generally large users) now pay ₦209.50 per kWh, close to the full rate, while Bands B–E are still subsidized but at higher levels. Importantly, new rules allow tariffs to adjust each month with inflation, exchange rates, and fuel costs. This means prices will vary with the economy, rather than being fixed by a rigid government price cap.
The exact new rates will depend on negotiations and regulator action. Adelabu is reportedly planning another tariff review to raise rates for Bands B and C in the coming months. Any increases are meant to be balanced by targeted relief: as energy adviser Olu Verheijen put it, Nigeria seeks a “cost-efficient but cost-reflective tariff” that raises enough revenue for investment while protecting the poor.
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| Power transformer on a pole in Nigeria, with rain clouds overhead. |
Nigeria’s Electricity Sector: Supply and Challenges
Nigeria’s power sector faces many problems. The country has a large population (over 220 million) but very limited electricity supply. Although installed generation capacity is over 13,000 megawatts (MW), only about one-third actually reaches customers. Frequent grid collapses, gas supply shortfalls, and vandalism leave average output well below 5,000 MW. In fact, the government reports show that as of early 2025 peak output was around 5,800 MW, compared to demand for much more.
This low output forces Nigerians to rely on backup power. Many businesses and homes run costly diesel generators or solar systems. One survey found that by mid-2024, over 250 companies and institutions had installed their own generation totaling 6,500 MW – more than Nigeria’s grid supply. Even large factories like Dangote Group produce 1,500 MW for themselves.
The transmission grid is a major bottleneck. It only covers roughly half the country. Whenever demand surges or lines fail, the entire grid can collapse, causing nationwide outages. The transmission company is building new transformers and lines (with help from Siemens and international funds), which recently pushed output up by 30%. Power Minister Adelabu noted in January that generation climbed 30% in 2024 (4,100 MW to 5,528 MW), partly thanks to a new 700 MW hydropower dam (Zungeru). But even that was short of the 6,000 MW target, as rolling outages (due to grid limits and gas shortages) held back supply.
In short, Nigeria’s electricity market is fragile and under-developed. Many customers are not metered, so billing is based on flat rates. This creates losses for power companies. In January 2025 Adelabu said only 6 million customers were metered out of 13 million, and the government plans to spend ₦700 billion to buy 2 million smart meters per year to close this gap. All these issues – from grid faults to billing gaps – mean that simply raising tariffs does not guarantee better power. Experts warn that solving Nigeria’s power woes requires investment in infrastructure alongside pricing reforms.
Reactions from Experts and Citizens
News of the subsidy cut and tariff hikes has sparked strong reactions. A public poll in April 2025 found 73.3% of Nigerians opposed electricity tariff increases and subsidy removal. Citizens cited rising living costs and unreliable supply as worries. One Lagos resident told reporters that electricity was already unreliable, and higher bills made life “unbearable” without better service (Figures and quotes like this circulate widely online).
Experts and industry groups have mixed views. Consumer advocate Kunle Olubiyo noted that even massive tariff hikes might not improve power. He pointed out that since privatization in 2013, tariffs have already jumped over 500%, yet generation remains far below demand. “Even if the tariff increases to N1,000 per kilowatt-hour, it will not guarantee improved quality of service or longer hours of electricity supply,” Olubiyo said. His point is that a broken system will not fix itself just by raising prices.
Some industry leaders welcome reform. Sunday Oduntan of the distributors’ association noted that a small fraction of consumers (Band A) currently pay the full cost, while the majority enjoy a subsidy. “If you are in Band B, C, D, or E, the government is subsidising your electricity consumption by as much as 67%,” he said, warning that the unpaid “subsidy” had actually been built up as debt by the sector. By his account, raising those tariffs was long overdue.
However, organized labor has threatened to resist steep hikes. The Nigeria Labour Congress (NLC) vowed a nationwide protest if Bands A, B, and C face higher rates. NLC’s Emmanuel Ugboaja sharply criticized the regulator’s plan to reclassify consumers and charge more. He called the tariff hike “economic violence” against workers and condemned shifting people into higher bands under the promise of better supply. This shows the political risk: high-profile opposition could pressure the government to delay or cushion reforms.
Even some economists urge caution. They note that without simultaneous improvement in actual power availability, higher bills may simply punish Nigerians. One think-tank report warned that ending subsidies is fiscally sound, but if service does not improve, public trust will erode. In other words, analysts say, subsidies might be reduced only when the grid reliably delivers more hours of power. Until then, ordinary Nigerians worry they will pay more for the same shaky supply.
Benefits and Challenges of Subsidy Removal
The government and many experts emphasize the benefits of ending subsidies:
Stronger finances. Cutting subsidies frees up billions of naira. Reuters reports Nigeria saved roughly ₦700 billion in sector revenue after last year’s tariff increase. These funds can reduce the enormous power debt and be re-invested in grid upgrades and maintenance.
Investor confidence. Private power companies have complained that fixed, low tariffs undermine their ability to operate. A cost-reflective system could attract more private and foreign investment into generation and transmission, improving capacity long-term.
Fairness. Subsidy removal, when well-targeted, means the richest users pay more. The government argues it will keep special subsidies for poor or essential sectors (like hospitals), while letting the broader market find its level.
End to inefficiency. Officials contend that blanket subsidies encourage wasteful consumption and deter conservation. If people pay the true cost, they might use electricity more carefully. Adelabu said Nigerians must pay “the appropriate price” as a way to strengthen the entire power chain.
However, the drawbacks are clear:
Higher bills for consumers. For now, most Nigerians will see their power bills rise. In a country where many earn low wages and face high inflation, this is a real hardship. Surveys show most people were not ready for such a jump: a Leadership report noted that over 75% found current tariffs unfair.
Short-term pain. Businesses and families already managing with erratic supply are nervous. As LoveworldSAT reported, many are already “paying more for less power.” (While that source is a media blog, similar complaints have been common in news comments.) The fear is that without immediate service improvements, customers will just protest or find alternative power sources.
Risk of unrest. Protests or strikes by labor unions are possible. Already, unions blocked a planned hike last year. If talks with labor break down, the government could face a political crisis that slows other reforms.
Economic impact. Higher electricity costs can slow business growth in the short term. Manufacturers, farmers with cold storage, and small shops may pass on costs or cut production. This impact worries economic planners, especially if wage growth lags behind tariff hikes.
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| A rural Nigerian neighborhood during heavy rain, with a single power pole. |
Toward a New Tariff Landscape
Nigeria has attempted several power reforms before. The 2013 privatization split generation and distribution into private companies, with the state keeping only transmission. But without cost-reflective pricing, these companies struggled under rising costs and unpaid bills. The 2021 Electricity Act and successive Multi-Year Tariff Orders laid the groundwork for gradual subsidy phase-out. This latest push builds on that trend.
Going forward, the new tariff model might look like this: Monthly adjustments to reflect fuel costs and inflation, higher base rates for mid-tier consumers (Bands B and C), and continued relief for the very poor or strategic sectors. The government may implement those changes in stages. For example, the band definitions themselves could be tweaked so that more households fall into “Band A” or “Band B”, effectively reducing how many hours of supply they get or how much they pay. Adelabu hinted at regulatory reviews to ease burdens on DisCos, suggesting a combination of tariff and non-tariff fixes.
Crucially, the success of cost-reflective pricing depends on on-ground results. If subsidy removal comes with new power stations, fixed lines, and more stable supply, Nigerians may grudgingly accept higher bills. But if outages continue, any goodwill will evaporate. Experts say the government must communicate clearly who will get what help, and ensure that at least promised improvements (like more meters, investments in gas supply, and rural electrification) actually happen.
In summary, Nigeria’s power policy has reached a turning point. Minister Adelabu’s statement signals the end of an era of cheap electricity. The aim is to restore economic balance and revitalize the sector. But for ordinary people, it means preparing for higher costs. As unions and consumer groups point out, the government faces a delicate task: subsidize smartly, invest wisely, and keep the lights on. Only then can ending subsidies be seen as progress rather than a step backward.