Nigeria Cuts Electricity Subsidies by 35% Amid Tariff Hike

Nigeria has slashed electricity subsidies by 35% following a tariff hike introduced last year, marking a pivotal shift in the nation’s power sector policy.

Power Minister Adebayo Adelabu announced on Thursday that this reduction stems from a targeted increase in tariffs for heavier users, including households and businesses with high electricity consumption.

The policy, which eliminated subsidies for 15% of customers classified as major consumers, has significantly bolstered public finances in Africa’s most populous country.

Previously, the government poured nearly 200 billion naira ($125.01 million) monthly into electricity subsidies to offset tariffs that were not commercially sustainable.

Adelabu revealed that the tariff adjustment has driven a 70% surge in market revenue, adding 700 billion naira to the sector’s earnings.

This financial boost has shrunk the government’s tariff shortfall from 3 trillion naira to 1.9 trillion naira, easing the strain on Nigeria’s fiscal resources.

Despite these gains, Nigeria’s power sector remains plagued by persistent challenges that hinder reliable electricity supply.

With an installed capacity of 13,000 megawatts, the country typically generates only about a third of this potential, leaving millions dependent on costly generators.

A crumbling grid, chronic gas shortages, rampant vandalism, and soaring debt levels continue to undermine the sector’s performance.

Historically low state-controlled tariffs have prevented distribution companies from recovering costs or settling payments with generating firms, deepening the financial crisis.

The debt owed to power generating companies has ballooned to 4 trillion naira ($2.50 billion), sparking threats of plant shutdowns across the industry.

To mitigate this, the government plans to clear half of this debt in 2025 using budgetary funds and promissory notes that companies can discount as needed.

Adelabu emphasized that while the subsidy cut and tariff hike have delivered short-term relief, comprehensive reforms are essential to tackle the sector’s entrenched issues.

For many Nigerians, the reliance on expensive alternatives persists as the nation strives for a stable, affordable electricity system.

The success of these efforts hinges on the government’s ability to address both financial and infrastructural deficits in the power sector.

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