Nigeria electricity subsidy disproportionately benefits middle-income consumers

A report by ZKJ Energy Partner Limited reveals that Nigeria’s electricity subsidy disproportionately benefits middle-income consumers. In 2025, Bands B and C received approximately 70% of the N1.93 trillion total subsidy, with Band B receiving N741 billion (38%) and Band C receiving N609 billion (32%).

In contrast, Band A customers—who are guaranteed at least 20 hours of daily electricity supply—paid tariffs slightly above the cost of service. Consequently, Band A received no subsidy and instead contributed an estimated N101 billion that helped offset the subsidies for lower-tier bands. The report noted that while the gross subsidy requirement was estimated at N2.03 trillion, the contribution from Band A reduced the net figure to N1.93 trillion.

The analysis described the subsidy structure as “regressive by design,” noting that while the cost to serve increases from Band A to Band E, tariffs decrease in the same direction. The report also highlighted inefficiencies within distribution companies, citing Yola Disco’s 44% losses compared to Ikeja Electric’s 14%, and identified inadequate infrastructure and gas supply constraints as primary challenges to the sector.