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• As FG seeks to attract private investment
Tayo Busayo, Abuja
DAILY COURIER — Nigerians should prepare for a significant increase in electricity tariffs within the coming months, the Federal Government has announced. The move, aimed at making power prices cost-reflective, is part of a broader strategy to attract private investment and improve the reliability of the country’s electricity supply.
Olu Verheijen, Special Adviser on Energy to President Bola Tinubu, disclosed this during an interview with Bloomberg on the sidelines of a World Bank-backed conference in Dar es Salaam, Tanzania. The conference saw Nigeria present a $32 billion plan to expand electricity connections by 2030, with $15.5 billion expected from private investors and the remainder from public sources, including the World Bank and African Development Bank.
Verheijen emphasized that Nigeria’s current electricity tariffs do not cover the cost of supply, making it difficult for power companies to maintain infrastructure and achieve profitability. She stated that tariffs need to rise by about two-thirds for many customers to reflect the true cost of electricity generation and distribution. However, she assured that subsidies would be implemented to protect less-affluent consumers from the full impact of the hike.
“One of the key challenges we’re looking to resolve over the next few months is transitioning to a cost-efficient but cost-reflective tariff,” Verheijen said. “This is needed so the sector generates revenue required to attract private capital, while also protecting the poor and vulnerable.”
The proposed tariff increase comes amid mounting pressure from Nigeria’s debt-burdened electricity distribution companies, which have long argued that cost-reflective tariffs are essential to improving their financial stability. Despite the privatization of power generation and distribution in 2013, prices set by the Nigeria Electricity Regulatory Commission (NERC) have failed to cover suppliers’ costs, leaving the sector reliant on government subsidies.
Nigeria’s power sector faces significant challenges, with only 8 gigawatts of the country’s 14 gigawatts of installed capacity currently transmittable, and just 4 to 5 gigawatts directly available to homes and businesses. To address these issues, the government is collaborating with Siemens AG on a $2.3 billion project to upgrade transmission and distribution infrastructure. Additionally, decentralized renewable energy projects have provided electricity access to over 7 million Nigerians in rural areas.
Verheijen linked the proposed tariff adjustments to Nigeria’s broader economic ambitions, including becoming a $1 trillion economy within five years and achieving upper-middle-income status within 25 years. “Your energy policies have to be closely linked with your own ambition for your country,” she said.
With Nigeria’s gross domestic product (GDP) currently standing at just under $200 billion, according to the International Monetary Fund (IMF), the success of these energy reforms will be critical to achieving the nation’s long-term development goals. However, the impending tariff hike is likely to spark debate among consumers, many of whom already grapple with unreliable power supply and high living costs.
As the Federal Government moves forward with its plans, the balancing act between attracting investment and protecting vulnerable households will remain a key focus in the months ahead.
