Electricity Tariff Hike Looms as Subsidy Costs Surge

Nigerian electricity customers, particularly those on Band A feeders, may face another tariff increase as the Federal Government’s electricity subsidy rises to N181.63 billion in September, up from N102.30 billion in May. The subsidy covers the shortfall between cost-reflective tariffs and what consumers pay, with Band A customers—who receive a minimum of 20 hours of power daily—having already seen their tariff rise to N225 per kilowatt-hour (KWh).

Data from the Nigerian Electricity Regulatory Commission (NERC) shows a steady increase in subsidies since April, when they amounted to N140.7 billion. By July, the figure had risen to N163.87 billion, followed by N173.88 billion in August. The growing cost is largely driven by the fluctuating naira-to-dollar exchange rate, which hit N1,601.5 per dollar in September, and rising inflation, which impacts the cost of power production.

Despite the rising cost, the government has yet to approve further tariff hikes, possibly due to the economic difficulties faced by Nigerians. However, with power generation costs increasing and distribution companies (Discos) operating at a loss, pressure is mounting to adjust tariffs, particularly for bands beyond Band A.

The Federal Government aims to increase electricity generation to 6,000 megawatts by the end of the year, but distribution companies have been rejecting surplus power due to non-cost-reflective tariffs, creating concerns over grid stability. As subsidy costs continue to climb, a tariff adjustment may be necessary to ensure the sustainability of the sector.