The Federal Government, under President Bola Ahmed Tinubu, has announced plans for an imminent increase in electricity tariffs, urging citizens to brace for the adjustment.
Tinubu’s Special Adviser on Energy, Olu Verheijen, revealed this in an interview with Bloomberg during a World Bank-backed energy conference in Dar es Salaam, Tanzania. At the event, Nigeria presented a $32 billion plan to expand electricity access by 2030, with $15.5 billion expected from private investors and the remainder from public sources, including the World Bank and African Development Bank.
According to Verheijen, electricity prices in Nigeria must rise by about two-thirds for many consumers to reflect the actual cost of power supply. While higher tariffs are necessary to attract private investment and improve electricity reliability, she emphasized that subsidies will be in place to protect less-affluent consumers.
“One of the key challenges we aim to resolve in the coming months is transitioning to a cost-reflective yet efficient tariff structure,” Verheijen stated. She added that this approach is crucial for generating the revenue needed to attract private capital while safeguarding the poor and vulnerable.
The push for higher tariffs comes amid growing pressure from Nigeria’s debt-laden electricity distribution companies, which argue that government-regulated prices are unsustainable. Although Nigeria privatized its power generation and distribution in 2013, current tariffs set by the Nigeria Electricity Regulatory Commission (NERC) do not fully cover suppliers’ costs. Government subsidies partially bridge the gap, but profitability remains elusive.
Nigeria’s electricity sector requires significant investment to meet its development targets. Of the country’s 14-gigawatt installed power capacity, only 8 gigawatts can be transmitted nationwide, with just 4 to 5 gigawatts reaching homes and businesses.
To address these challenges, Siemens AG is collaborating with the government on a $2.3 billion project to enhance power transmission and distribution. Additionally, over 7 million rural Nigerians have gained electricity access through decentralized renewable energy projects.
“Energy policies must align with national economic ambitions,” Verheijen stated. “Our goal is to become a $1 trillion economy within five years and achieve upper-middle-income status in 25 years.”
Currently, Nigeria’s GDP stands at just under $200 billion, according to the International Monetary Fund (IMF).