In a recent briefing in Abuja, Dr. Adebayo Adelabu, Nigeria’s Minister of Power, disclosed that the Federal Government has allocated a significant N2.9 trillion towards subsidizing the electricity sector. Despite a recent increase in tariffs for Band A electricity consumers, the government continues to absorb approximately 75% of the total electricity supply costs in the country.
Dr. Adelabu reaffirmed the government’s commitment to its pro-poor energy policy, stating that it still subsidizes over two-thirds (67%) of the overall cost involved in generating, transmitting, and distributing electricity to Nigerians. The goal is to make electricity affordable and accessible to the population, especially those in lower income brackets.
The Minister highlighted the importance of ensuring the operational sustainability of power companies, underscoring the need for these companies to recover costs and ultimately become profitable. He reiterated that the government would not eliminate electricity subsidies entirely, despite growing pressures on fiscal resources. The ongoing N2.9 trillion investment, he explained, demonstrates the government’s determination to improve Nigeria’s power infrastructure and ensure reliable electricity access for all.
Dr. Adelabu explained that a business can only survive if it can cover its operating costs, stressing that in the power sector, cost recovery could be achieved either through full market pricing (where consumers bear the entire cost, including profit margins) or through a subsidized model, which is what Nigeria currently employs. While commercial pricing transfers the full cost to consumers, the government’s subsidized pricing model covers a large portion of the electricity generation cost.
However, the Minister acknowledged that continuing full subsidies is no longer viable due to competing demands for government resources. A gradual reduction in the subsidy, he suggested, would not only allow for more localized investments in the sector but could also attract foreign investment, fostering long-term sector growth.
The tariff increase, Dr. Adelabu explained, would only impact about 15% of electricity consumers, roughly 1.5 million people. Even with the tariff hike, the cost per kilowatt remains more than 50% lower than the cost of alternative energy sources, such as diesel-powered generators, which also incur additional costs for fuel, maintenance, and equipment.
Under the new tariff structure, certain consumers will benefit from up to 20 hours of electricity per day, with 481 feeders classified under Batch A to ensure steady supply. This tariff review is part of the government’s broader strategy to stimulate competition, improve sector liquidity, and encourage further investments in the power industry. The long-term goal, according to the Minister, is to transition towards a fully cost-reflective tariff structure over a period of three years.
Dr. Adelabu assured that the government is mindful of the economic difficulties faced by citizens, and thus, has implemented a gradual transition to avoid the sudden removal of subsidies, as was seen in the oil and gas sectors. This phased approach is designed to cushion the impact on consumers and ensure that the transition is as smooth as possible.
Furthermore, the decentralization of the power sector, following the enactment of the Power Sector Act, opens the door for greater participation by various stakeholders beyond the federal government. This move aims to foster competition, increase investment, and ultimately enhance service delivery in the sector.
The Minister of Information and National Orientation, Mohammed Idris, who hosted the meeting, supported the tariff adjustment, calling it a vital step toward building a more efficient and sustainable electricity sector. While acknowledging that the tariff changes may cause concerns for some, he reassured Nigerians that the ultimate goal was to ensure a fairer, more transparent, and more efficient electricity system for all.
