Nigeria’s electricity sector is facing renewed scrutiny following a landmark decision by the Enugu State Electricity Regulatory Commission (EERC) to slash electricity tariffs for Band A customers.
The decision, while hailed by some as a step toward localised energy autonomy, has stirred up intense scrutiny of the country’s power distribution companies (DisCos), especially in relation to their current high electricity charges.
At the centre of the storm is the new tariff order issued by the EERC for MainPower, the state’s electricity distribution licensee, which sets Band A tariffs at N160 per kilowatt-hour (kWh) for the year 2025.
Read also: Pressure mounts on seven states to follow Enugu DisCo’s Band A tariff cut
This figure stands in stark contrast to the current national composite average of N208/kWh, prompting questions about the basis of DisCos’ higher charges and the integrity of federal electricity pricing models.
The development marks one of the most significant tests yet of Nigeria’s Electricity Act 2023, which devolved power sector regulation to the states, allowing sub-national entities to determine tariffs independently.
Enugu has become one of the first states to seize this opportunity, setting a precedent that could reshape how electricity pricing is structured across the country.
A senior oil executive in the power sector told BusinessDay that the disaggregation into state electricity markets has compelled closer scrutiny of how Discos’ costs are passed on to customers.
“That can only be a good thing. It makes the ongoing effort driven by the Enyinnaya Abaribe-Senate Committee on Power – to amend the Electricity Act to reverse this constitutional mandate to disaggregate into state markets – very likely not to succeed because the states will push back very hard,” he said.
Even more contentious is EERC’s estimate that electricity generation costs over the next five years would average N45/kWh, a steep departure from the current national average of N112/kWh.
This estimate implies that the federal government would need to cover a staggering 60 percent shortfall, or an average subsidy of N67/kWh, to make up the difference.
Critics say this expectation is unrealistic, especially given the federal government’s ongoing struggles to pay existing power sector debts. Since President Bola Tinubu assumed office, electricity debts have ballooned to around N3 trillion, with no payments made thus far.
Although the 2025 federal budget includes N900 billion for electricity subsidies, industry stakeholders argue that the funds have not been released or backed with adequate policy commitments.
Compounding the problem are structural inefficiencies across the value chain. According to data from NERC, the Multiple-Year Tariff Order (MYTO) allocates N70/kWh for generation, N50/kWh for gas, N11/kWh for transmission, and N77/kWh for distribution. When technical, commercial, and collection losses – estimated at 39.1 percent as of Q3 2024 – are factored in, the composite tariff inflates to N208/kWh.
That means almost N40 of every N100 worth of electricity is lost and passed on to paying customers, who also bear the cost of meter acquisition and loans taken out by market operators.
Kunle Olubiyo, electricity consumer advocate, criticised the arrangement, saying that end-users are bearing the brunt of an inefficient system.
“The consumer is paying for power that’s lost to theft, faulty infrastructure, and poor metering. We need to interrogate the assumptions and indicators behind the tariff formula. It’s skewed against consumers,” he said.
Read also: Enugu crashes Band A electricity tariff to N160/kwh
Ripple effects across the sector
Enugu’s tariff announcement is already creating ripple effects across the electricity landscape. Consumer advocacy groups have seized the moment to demand explanations from other DisCos as to why their tariffs remain high despite a supposed move toward cost-reflectivity.
The perception that customers in Enugu may pay significantly less for the same quality of electricity service has raised public expectations and increased pressure on other state governments to follow suit.
Despite vehement pushback, several states have signalled their intention to follow Enugu’s lead.
Seven states, including Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi, have now assumed regulatory control under the Electricity Act 2023, which devolved authority over generation and distribution to state governments.
Four more, Lagos, Ogun, Niger, and Plateau, are set to complete their transitions by September.
Meanwhile, investors and market observers are closely watching how this experiment in state-level regulation unfolds. A successful implementation in Enugu could trigger a wave of similar actions across Nigeria, leading to a more fragmented but potentially more competitive power market.
Market viability
Analysts also warn that Enugu’s decision, while politically popular, may not be commercially viable in the long run if the underlying assumptions prove faulty.
There’s a risk that such moves could evolve into populist gestures that fail to align with market fundamentals, eventually eroding trust and straining the system further.
“Tariff setting is a delicate balance between affordability and sustainability,” said Adebayo Ojo, energy economist at Sofidam Capital. “If states start under-pricing power to score political points, we might end up with a patchwork of broken systems. But if they get it right, if they genuinely have lower cost structures, it could revolutionise electricity delivery in Nigeria.”
Still, the EERC insists that its framework is built on a sound economic model and driven by a commitment to affordability and efficiency.
According to the agency, its forward-looking tariff schedule incorporates capital recovery, investment planning, and incentives for service improvement, not just political considerations.
Federal push for broader tariff hikes
The Enugu move comes at a time when the federal government is under pressure to increase tariffs for Band B to E customers, a group that comprises the bulk of residential and small business consumers across Nigeria. While Band A customers, who are meant to receive a minimum of 20 hours of electricity per day have already seen hikes in recent months, many lower-tier customers continue to receive heavily subsidised power.
The push for broader tariff increases stems from the sector’s growing liabilities, which are becoming unsustainable.
Investor confidence is already shaky. Years of unpaid debts, policy inconsistencies, and opaque regulatory decisions have made Nigeria’s power sector a hard sell for both local and foreign capital.
The lack of clear frameworks for cost recovery and subsidy payment mechanisms adds another layer of risk, discouraging long-term investments in generation, distribution, and infrastructure upgrades.
Still, many argue that a tariff reset is inevitable. As electricity costs push businesses and even government agencies off the grid and toward alternative energy sources like diesel generators and solar systems, the economic rationale for staying connected weakens.
For example, even President Tinubu was recently reported to have opted for off-grid solutions due to high electricity costs.
