Nigerians Told To Prepare for Higher Electricity Bills as Government Moves to End "Unsustainable Subsidies"

 

A fundamental shift is looming over Nigeria's power sector, as the Federal Government signals a decisive move toward phasing out electricity subsidies in favor of a tariff structure that better mirrors actual production and supply costs.

Minister of Power, Adebayo Adelabu, delivered the sobering news during a meeting held in Abuja with the heads of Nigeria’s power generation companies (Gencos). According to the minister, the country can no longer afford the financial weight of electricity subsidies, which he described as unsustainable under the prevailing economic circumstances.

He explained that the intention of the government is not to impose hardship on the populace, but rather to realign the power sector with economic realities and drive improvements in service delivery and infrastructure development.

“Our economy cannot sustain subsidies indefinitely,” Adelabu stated, adding that such financial models are detrimental to growth and operational stability within the power sector. “Citizens must pay the appropriate price for the energy consumed,” he added firmly.

This message comes against the backdrop of a growing financial crisis in the electricity value chain. Presently, the federal government owes the generating companies a staggering sum exceeding N4 trillion due to overdue subsidy payments, a debt that has become a heavy burden on both operators and the national budget.

Latest data from the Nigerian Electricity Regulatory Commission (NERC) paints a clearer picture of the disconnect between actual production costs and what consumers currently pay. The Commission’s February performance report revealed that the average real cost of producing electricity stands at N116.18 per kilowatt-hour (kWh). However, the average tariff charged to consumers is only N88.20/kWh, leaving a subsidy gap of N27.97/kWh.

This shortfall is covered by the federal government and constitutes a major source of revenue leakage. Only a minority segment—about 15 percent of consumers classified under Band A—currently pays tariffs that reflect cost-reflective rates. The remainder of the Nigerian Electricity Supply Industry (NESI) customer base continues to enjoy subsidized rates.

Adelabu emphasized the importance of establishing a sustainable pricing structure for electricity, noting that continuing with heavy subsidies will hamper efforts to improve the sector’s efficiency and reliability. He warned that Nigeria's economic challenges make it increasingly difficult to justify and maintain such large-scale government intervention in electricity pricing.

Despite the planned reforms, the government reassures citizens that measures will be taken to shield the most vulnerable segments of the population. Adelabu's spokesperson, Bolaji Tunji, reiterated that while broad subsidies may be phased out, targeted assistance will be provided to low-income households to ensure they are not left behind in the policy transition.

“The Federal Government will continue to provide targeted subsidies for economically disadvantaged Nigerians,” Tunji stated, signaling that social equity remains a consideration even as fiscal discipline is being enforced.

This policy direction, while controversial, has been welcomed by some stakeholders in the power industry who argue that subsidy removal is essential to attract investment and enhance operational transparency. Many of Nigeria’s Gencos have long struggled with cash flow constraints, delayed payments, and funding gaps that have stifled capacity expansion and equipment upgrades.

Analysts have warned, however, that a poorly managed transition could provoke public backlash, especially given the current cost-of-living crisis affecting millions of Nigerians. Electricity is a vital utility, and price increases can have ripple effects across sectors, particularly in manufacturing and small-scale enterprises that rely heavily on grid power.

Consumer advocacy groups are already calling for clearer communication from the government and a phased approach that allows households and businesses time to adjust. They also stress the need for visible improvements in power supply before higher tariffs are enforced. Chronic outages, poor metering, and estimated billing remain key complaints among electricity users.

Adelabu acknowledged these concerns, assuring that the government is concurrently pursuing reforms aimed at boosting generation capacity, improving transmission infrastructure, and enhancing distribution efficiency. He noted that electricity sector transformation requires shared responsibility between the state, providers, and end-users.

The looming tariff adjustments mark a turning point in Nigeria’s energy policy. For decades, subsidies have been a cornerstone of public utility management, often justified as a means of cushioning the masses from economic shocks. However, with a growing consensus on the inefficiencies such subsidies breed, the government now appears determined to pursue a more market-oriented approach.

Whether this bold shift will yield long-term gains or spark short-term unrest remains to be seen. What is clear, however, is that the era of cheap, government-subsidized electricity may be drawing to a close.