Nigeria has implemented a substantial reduction in its electricity subsidies—approximately 35%—following the government’s approval of increased electricity tariffs for urban consumers receiving at least 20 hours of daily supply. The reform, announced by the Nigerian Electricity Regulatory Commission (NERC), is part of a broader strategy to attract investment into the power sector and alleviate the mounting fiscal burden associated with state-backed subsidies.
The revised tariff framework, introduced in early April 2025, targets “Band A” consumers—those with more consistent power supply—who now pay ₦225 per kilowatt-hour (kWh), up from ₦68/kWh. This adjustment effectively removes government subsidy for this category, shifting the full cost of electricity provision onto the consumer. The change is expected to affect approximately 15% of Nigeria’s electricity users, predominantly in urban centres such as Lagos, Abuja, and Port Harcourt.
According to data from the Nigerian Ministry of Power, electricity subsidies had cost the federal government an estimated ₦3 trillion between 2015 and 2024. In the 2024 fiscal year alone, ₦600 billion was allocated for tariff shortfalls. The new policy aims to curb this unsustainable trend and reduce Nigeria’s fiscal deficit, which has been exacerbated by global energy price volatility and domestic revenue constraints.
Officials from NERC stated that the subsidy reduction would free up resources for critical infrastructure development and improve service delivery. However, the policy has sparked criticism from civil society organisations and labour unions, who argue that the sudden shift places undue financial strain on middle-income households. The Nigerian Labour Congress (NLC) has called for a transparent audit of the sector and demanded measures to ensure that the quality of power supply corresponds with the increased tariff rates.
Despite the pushback, government representatives have defended the decision, noting that the reforms align with Nigeria’s commitment to transitioning towards cost-reflective tariffs—a key condition outlined by the World Bank in various energy sector funding programmes. According to World Bank data, only 45% of Nigeria’s power demand is currently met by the grid, with frequent outages pushing many consumers toward diesel or petrol-powered generators.
The power sector remains a bottleneck in Nigeria’s economic development, with the country’s installed capacity standing at around 13,000 megawatts (MW), but actual generation hovering between 3,000 and 4,500 MW due to transmission and distribution constraints. Sector analysts argue that removing subsidies for high-consumption users may enable DisCos (Distribution Companies) to invest in network upgrades, reduce energy losses, and eventually expand access to underserved communities.
Observers have pointed to Kenya and South Africa as examples where targeted subsidy reforms have led to improved service delivery and greater private-sector participation. Nigeria’s policymakers, however, face a delicate balancing act between fiscal sustainability and social equity
