Nigeria electricity subsidy reform and tariff analysis

The Nigerian government has announced plans to begin phasing out electricity subsidies in 2027 as part of broader fiscal reforms. Power Minister Joseph Tegbe stated that while there are no immediate plans to raise tariffs, a Power Consumer Assistance Fund will be established to support low-income households during the transition. These reforms aim to improve fiscal sustainability and attract investment through grid upgrades and metering initiatives.

Analysis of the current subsidy structure indicates that the system is “regressive by design.” A report by ZKJ Energy Partner Limited found that the subsidy disproportionately benefits middle-income consumers in Bands B and C, who received approximately 70% of the N1.93 trillion total subsidy in 2025. Specifically, Band B received N741 billion (38%) and Band C received N609 billion (32%). Conversely, Band A customers, who receive at least 20 hours of daily electricity, paid tariffs above the cost of service and contributed an estimated N101 billion to offset subsidies for other tiers. The report noted that while the gross subsidy requirement was estimated at N2.03 trillion, the Band A contribution reduced the net figure to N1.93 trillion.

Data from the Nigerian Electricity Regulatory Commission (NERC) shows that Nigeria recorded the lowest average electricity tariff among 14 selected African countries in 2025, at ₦124.30 per kWh (approximately $0.08/kWh). This is 42.11% of the $0.19/kWh average recorded across the other surveyed markets. To manage sector debts, President Bola Tinubu approved a ₦3.3 trillion payment plan in April 2025, alongside frameworks for a ₦4 trillion government-backed bond to clear arrears owed to gas suppliers and generation companies.