Nigeria has continued to offer the cheapest electricity tariffs in West Africa, even as it shoulders a growing subsidy burden and contends with unpaid debts from neighbouring countries.
The latest 2024 Annual Report of the Nigerian Electricity Regulatory Commission (NERC) shows that, despite a cumulative $14.01 million in outstanding payments from Togo, Benin, and the Niger Republic, Nigeria’s average end-user tariff remains well below regional benchmarks.
According to the report, the three West African utilities, Nigerienne d’Électricité (NIGELEC) of Niger Republic, Société Béninoise d’Énergie Électrique (SBEE) of the Benin Republic, and Compagnie Énergie Électrique du Togo (CEET), were billed a combined $56.07 million in 2024 for ancillary services provided by the Nigerian electricity market. These services are coordinated by the Market Operator (MO), a unit of the Transmission Company of Nigeria (TCN).
However, the utilities remitted only $42.06 million, translating to a remittance rate of 75.01%, and leaving an unpaid balance of $14.01 million for the period under review.
Nigeria’s tariff gap widens
NERC’s data shows that the average allowed end-use customer tariff in Nigeria stood at $0.07 per kilowatt-hour (kWh), approximately ₦100.27/kWh, which is just 35.71 percent of the average $0.19/kWh tariff charged in other selected West African countries.
In contrast, the cost-reflective tariff (CRT), the actual cost of supplying electricity in Nigeria, was $0.12/kWh (₦175.31), representing 63 percent of the average rate in the comparator countries.
This pricing gap has been sustained by government subsidies, which averaged ₦75.04/kWh in 2024, one of the highest subsidy levels in recent years. The report underscores that this subsidy burden reflects the Federal Government’s continued effort to shield consumers from the full economic cost of power supply, even in the face of growing fiscal pressures.
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DisCo disparities
The NERC report also highlighted significant variations in CRT across the country’s electricity distribution companies (DisCos).
Yola Electricity Distribution Company (Yola DisCo) posted the highest CRT in 2024, a situation the regulator attributed to elevated operational costs in its service areas, compounded by vandalism and persistent security challenges.
Because Yola DisCo’s allowed tariff remains pegged to the national average, it effectively benefits from the largest per-unit subsidy in the country—nearly double that of other DisCos.
On the other end of the spectrum, Ikeja Electric and Eko Electricity Distribution Company operate with relatively lower CRTs, resulting in smaller subsidy allocations per unit of electricity delivered.
Subsidy pressure mounts
The financial impact of this tariff–cost gap on the Federal Government has been significant. In the last quarter of 2024 alone, the government’s electricity subsidy obligation reached ₦91.63 billion.
The gap widened due to a continued freeze on electricity tariffs at December 2022 levels throughout 2024. This policy drove the subsidy cost in the first quarter of 2024 to ₦633.30 billion, representing a staggering 303% increase over the 2023 quarterly average of ₦157.15 billion.
Although the April 2024 tariff adjustment for Band A customers temporarily eased the pressure—reducing the subsidy bill to ₦380.06 billion in Q2—a subsequent government directive in July to freeze tariffs for the remainder of the year reversed those gains.
Regional context and policy implications
Nigeria’s comparatively low electricity tariff, while politically popular, continues to pose economic and operational challenges for the power sector. Industry analysts note that the pricing gap discourages private investment, limits infrastructure upgrades, and perpetuates liquidity shortfalls in the electricity value chain.
Furthermore, the outstanding payments from Nigeria’s regional customers add to the sector’s financial strain. Under the West African Power Pool (WAPP) framework, Nigeria exports electricity to neighbouring countries to support regional power stability and earn foreign exchange. However, irregular remittances from partner utilities have left Nigeria effectively subsidising cross-border supply.
For comparison, West African peers have implemented higher domestic tariffs that more closely align with their CRT, reducing the need for large-scale government subsidies. The average $0.19/kWh charged in these countries allows utilities to recover costs and invest in network expansion without heavy fiscal support.
By contrast, Nigeria’s approach has maintained consumer affordability but at the expense of public finances. The NERC report suggests that without gradual alignment of tariffs with CRT, the subsidy bill will remain a significant drain on the national budget.
