In a bid to revive its struggling power sector, Nigeria is seeking to attract private investors by introducing higher electricity tariffs while offering fresh subsidies to cushion the impact on consumers.
According to Bloomberg, the government has proposed a plan where Nigerian households will receive 50 kilowatt-hours (kWh) of subsidized electricity per month, either through direct consumption or via voucher programs. This initiative was presented at a World Bank energy summit in Tanzania, where Nigeria outlined its strategy to secure $15 billion in private investment to bridge an estimated $23 billion funding gap in the power sector.
Bridging the Energy Gap
Nigeria, despite its vast natural gas reserves, hydro potential, and abundant sunlight, generates only 13,000 megawatts (MW) of electricity for over 200 million people. This has resulted in chronic power shortages, frequent blackouts, and widespread reliance on expensive private generators.
By contrast, South Africa, with a population three times smaller, has an electricity generation capacity of 52,000 MW—highlighting the scale of Nigeria’s energy deficit.
A Push for Renewable Energy and Grid Expansion
As part of its new plan, Nigeria aims to:
- Increase renewable energy’s share in its total power generation mix from 22% to 50% within five years.
- Expand grid connectivity, aiming to more than double the number of households gaining access to electricity each year.
- Implement cost-reflective tariffs by 2027, while ensuring a safety net for low-income and vulnerable households.
Balancing Tariff Hikes with Subsidies
Last year, Nigeria removed electricity subsidies for about 15% of mostly urban consumers, which led to a threefold increase in tariffs. Despite this, the government still spent around ₦2.2 trillion on subsidies in 2024.
Under the new plan, the government intends to gradually shift toward a fully cost-reflective tariff system, ensuring that electricity prices align with production costs while still protecting the most vulnerable consumers.
Will Investors Buy In?
Nigeria’s power sector has long struggled with inefficiencies, financial shortfalls, and unreliable supply, deterring investors. However, the new strategy signals a commitment to market-driven reforms while maintaining some level of government support. The question remains: Will these incentives be enough to attract the $15 billion Nigeria is hoping for?
If successful, the plan could be a game-changer, bringing stable electricity to 86 million Nigerians currently living without power and reducing the nation’s dependence on costly alternative energy sources.
