Over the previous 25 years (1999–2023), the proportion of Nigerians with entry to electrical energy has solely elevated from 44.9 p.c to 61.2 p.c. In the identical interval, South Africa improved from 71.3 p.c to 87.7 p.c, Kenya from 13.2 p.c to 76.2 p.c, and Cote d’Ivoire from 48.2 p.c to 72.4 p.c, in response to World Financial institution knowledge.
Furthermore, Nigeria considerably lags by way of electrical energy consumption, recording simply 181.63 kWh per capita yearly—the bottom among the many international locations in contrast. In distinction, South Africa consumes 3,779.72 kWh, Brazil 3,295.31 kWh, and Turkey 3,726.45 kWh per capita.
Privatisation’s damaged promise
The privatisation of electrical energy, which was completed in 2013, has didn’t yield the promised outcomes for Nigerians. In that yr, then-President Goodluck Jonathan handed over the Energy Holding Firm of Nigeria (PHCN) to the personal sector, aiming to ship uninterrupted energy provide to the inhabitants. As we speak, nonetheless, erratic electrical energy stays one of many greatest challenges for Nigerian companies.
The Central Financial institution of Nigeria (CBN)’s April 2025 Enterprise Expectations Survey (BES) highlights this grim actuality: 74.2 p.c of companies cited inadequate energy provide as one of many main constraints, even after current tariff hikes and with one other enhance looming. This concern is underscored by the World Financial institution’s suggestion in its Could 2025 Nigeria Growth Replace (NDU), which known as for cost-reflective electrical energy tariffs whereas advocating for a common subsidy to stabilise the macroeconomy.
This follows the Nigerian Electrical energy Regulatory Fee’s (NERC) February 2025 report on Distribution Corporations (DisCos), which acknowledged that the typical precise tariff stood at N116.18/kWh, whereas shoppers paid solely N88.2/kWh, leaving a subsidy hole of N27.98/kWh.
Adebayo Adelabu, Nigeria’s minister of energy, has additionally hinted at an imminent enhance in electrical energy tariffs.
Learn additionally: How dropping Nigeria’s greatest energy prospects has left the grid unbankable
The subsidy quandary
In accordance with NERC’s fourth quarter (This autumn) of 2024 report, electrical energy shoppers in Nigeria continued paying the identical charges set in July 2024, regardless of a major rise in the price of energy technology. To bridge this hole and stop collapse within the electrical energy market, the federal authorities bore N471.69 billion—round 57 p.c of the full technology price—as subsidy, whereas the DisCos lined the remaining N360.97 billion, or 43 p.c.
But this strategy stands in distinction to earlier official claims. In March 2022, Zainab Ahmed, then minister of finance underneath President Muhammadu Buhari, asserted that every one electrical energy subsidies had been ‘quietly’ eliminated. “We have now been capable of quietly implement subsidy removing within the electrical energy sector, and as we converse, we don’t have subsidies within the electrical energy sector. We did that incrementally over time by fastidiously adjusting the costs at some ranges whereas holding the decrease ranges down,” she stated.
The NERC defines a cost-reflective tariff as one which mirrors the precise price of manufacturing and delivering electrical energy, making an allowance for inflation, alternate charges, technology capability, fuel costs, and different uncontrollable price drivers inside the energy sector.
However in fact, current reforms have worsened Nigeria’s macroeconomic indicators. With no shift in strategy, residents might discover little reduction within the close to future.
The social contract fractures
The Nigerian authorities has, in some ways, damaged its social contract with its folks by failing to take care of value stability and guarantee a bearable way of life. Essentially the most speedy different to unreliable grid energy—a generator—has grow to be prohibitively costly. In the meantime, clear power options comparable to photo voltaic panels and inverters stay out of attain for the typical citizen.
In accordance with social contract principle, initially developed by Thomas Hobbes, an English thinker, people give up sure freedoms to the state in return for defense and order. Hobbes famously warned that within the absence of presidency, life can be ‘merciless, brutish, and brief.’ The social contract implies that the state should protect peace and supply fundamental wants. When the state fails to offer secure electrical energy or inexpensive alternate options, notably when even mills grow to be unaffordable, it violates that settlement.
Whereas Hobbes believed residents had no proper to insurgent, John Locke, the English thinker, took a extra democratic stance. He argued that when a authorities fails to guard basic rights—life, liberty, and property—the folks not solely have the appropriate, however the responsibility, to withdraw their consent. In Nigeria’s case, the shortcoming of the state to offer inexpensive and dependable electrical energy erodes its legitimacy, main residents to query the worth of their continued loyalty.
“When folks don’t have regular and inexpensive electrical energy, it seems like the federal government isn’t holding up its finish of the deal,” stated Habu Sadeik, an power knowledgeable. “Energy is such a fundamental want—for houses, companies, faculties, hospitals—so when it consistently fails, it sends a message that residents’ wellbeing isn’t a precedence. It’s laborious to belief leaders when one thing so fundamental nonetheless doesn’t work. Over time, that basically chips away at folks’s religion within the system.”
Learn additionally: Working on Empty: Electrical energy sector reform and Nigeria’s nationwide safety crucial
Required funding
Minister Adelabu lately acknowledged that the nation requires $10 billion yearly for the subsequent 10 to twenty years to construct a useful and dependable energy sector. “For us to realize useful, dependable, and secure electrical energy in Nigeria, we’d like not lower than $10 billion yearly for the subsequent 10 to twenty years,” he stated. To place this in perspective, $10 billion (N16 trillion) represents round 29.1 p.c of Nigeria’s 2025 nationwide price range. Clearly, personal funding will probably be essential however the core query stays whether or not Nigeria can assure returns on such funding? Any investor, naturally, seeks revenue, however with out secure insurance policies and client buying energy, the funding local weather stays unsure.
Classes from overseas
World experiences supply useful classes. In Indonesia, gas and electrical energy subsidies had been progressively phased out between 2017 and 2020. Although inflation briefly rose from 5.1 p.c to eight.3 p.c, the federal government cushioned the impression with focused social welfare programmes. The lesson right here is obvious: phased subsidy removing, when paired with security nets, can scale back public backlash.
In Egypt, between 2022 and 2024, the federal government initially minimize electrical energy subsidies for industries, giving households extra time to regulate. Family tariffs ultimately rose by 45 p.c, however energy reliability improved, and industries tailored via investments in photo voltaic power. The important thing takeawayis that reforms ought to start with these most capable of soak up the shock, slightly than imposing hardship on low-income households from the outset.
Nigeria, nonetheless, has taken a extra abrupt strategy—implementing sharp tariff hikes and eradicating subsidies with out establishing any credible safety for essentially the most weak. With out transparency, phased implementation, and help for these most affected, the nation dangers deepening its financial and social divides. Reforms with out empathy will not be reforms however rupture.
The info deficit and subsidy injustice
Sunday Oduntan, CEO of the Affiliation of Nigerian Electrical energy Distributors, captured the gravity of the issue succinctly. He famous that in 2024, the federal government’s electrical energy subsidy soared to N2.4 trillion, up from N650 billion in 2023. “This pattern is unsustainable, extremely inefficient, and, sadly, it additionally fuels corruption, largely as a result of we lack a clear and efficient subsidy framework,” he stated.
In a Channels Tv interview, Oduntan additional highlighted the shortage of correct knowledge as a serious barrier to focused subsidies. “We can’t proceed with common subsidies. Why ought to millionaires like Aliko Dangote or Sanwo-Olu be subsidised? The federal government should develop a system to determine and help solely the weak pensioners, the unemployed, and people really in want. However Nigeria lacks the info to do that pretty. Till we repair this, subsidy removing will stay a blunt instrument that harms the poor whereas shielding the elite.”
This speaks to a broader concern. Whereas subsidies are meant to make important companies extra inexpensive, and taxes are levied to fulfill public monetary obligations, each are underpinned by the identical rules of equity and justice. Omo Aregbeyen, professor of public finance on the College of Ibadan, explains this precept. “In taxation, horizontal fairness means folks in comparable monetary conditions must be handled equally, whereas vertical fairness holds that these with larger capability ought to contribute extra.”
These rules also needs to information subsidy allocation. But within the absence of dependable knowledge, implementation turns into flawed. Contemplate a group the place each low-income and rich people reside. A common subsidy in such an space implies that the wealthy profit simply as a lot because the poor, if no more. This breaches vertical fairness, as the rich, who pays the total value, obtain state help meant for the weak. It additionally undermines horizontal fairness, as unequal teams are handled the identical.
The result’s a deeply inefficient system the place large public spending fails to succeed in those that want it most. Worse nonetheless, it opens the door to abuse, permitting prosperous people to profit from scarce public sources underneath the guise of poverty. Simply as a good tax system ensures the rich contribute proportionately, a sound subsidy regime ought to guarantee help reaches solely these genuinely in want. Something much less corrodes public belief and squanders nationwide wealth.
