Nigeria has continued to supply the most cost effective electrical energy tariffs in West Africa, even because it shoulders a rising subsidy burden and contends with unpaid money owed from neighbouring international locations.
The most recent 2024 Annual Report of the Nigerian Electrical energy Regulatory Fee (NERC) reveals that, regardless of a cumulative $14.01 million in excellent funds from Togo, Benin, and the Niger Republic, Nigeria’s common end-user tariff stays nicely beneath regional benchmarks.
Based on the report, the three West African utilities, Nigerienne d’Électricité (NIGELEC) of Niger Republic, Société Béninoise d’Énergie Électrique (SBEE) of the Benin Republic, and Compagnie Énergie Électrique du Togo (CEET), had been billed a mixed $56.07 million in 2024 for ancillary companies offered by the Nigerian electrical energy market. These companies are coordinated by the Market Operator (MO), a unit of the Transmission Firm of Nigeria (TCN).
Nonetheless, the utilities remitted solely $42.06 million, translating to a remittance price of 75.01%, and leaving an unpaid steadiness of $14.01 million for the interval beneath evaluation.
Nigeria’s tariff hole widens
NERC’s knowledge reveals that the common allowed end-use buyer tariff in Nigeria stood at $0.07 per kilowatt-hour (kWh), roughly ₦100.27/kWh, which is simply 35.71 p.c of the common $0.19/kWh tariff charged in different chosen West African international locations.
In distinction, the cost-reflective tariff (CRT), the precise price of supplying electrical energy in Nigeria, was $0.12/kWh (₦175.31), representing 63 p.c of the common price within the comparator international locations.
This pricing hole has been sustained by authorities subsidies, which averaged ₦75.04/kWh in 2024, one of many highest subsidy ranges in recent times. The report underscores that this subsidy burden displays the Federal Authorities’s continued effort to protect shoppers from the complete financial price of energy provide, even within the face of rising fiscal pressures.
Learn additionally: Electricity tariff hikes: Time to fix the broken system
DisCo disparities
The NERC report additionally highlighted vital variations in CRT throughout the nation’s electrical energy distribution corporations (DisCos).
Yola Electrical energy Distribution Firm (Yola DisCo) posted the very best CRT in 2024, a state of affairs the regulator attributed to elevated operational prices in its service areas, compounded by vandalism and protracted safety challenges.
As a result of Yola DisCo’s allowed tariff stays pegged to the nationwide common, it successfully advantages from the biggest per-unit subsidy within the nation—practically double that of different DisCos.
On the opposite finish of the spectrum, Ikeja Electrical and Eko Electrical energy Distribution Firm function with comparatively decrease CRTs, leading to smaller subsidy allocations per unit of electrical energy delivered.
Subsidy stress mounts
The monetary influence of this tariff–price hole on the Federal Authorities has been vital. Within the final quarter of 2024 alone, the federal government’s electrical energy subsidy obligation reached ₦91.63 billion.
The hole widened attributable to a continued freeze on electrical energy tariffs at December 2022 ranges all through 2024. This coverage drove the subsidy price within the first quarter of 2024 to ₦633.30 billion, representing a staggering 303% improve over the 2023 quarterly common of ₦157.15 billion.
Though the April 2024 tariff adjustment for Band A prospects briefly eased the stress—lowering the subsidy invoice to ₦380.06 billion in Q2—a subsequent authorities directive in July to freeze tariffs for the rest of the 12 months reversed these beneficial properties.
Regional context and coverage implications
Nigeria’s comparatively low electrical energy tariff, whereas politically common, continues to pose financial and operational challenges for the ability sector. Business analysts word that the pricing hole discourages personal funding, limits infrastructure upgrades, and perpetuates liquidity shortfalls within the electrical energy worth chain.
Moreover, the excellent funds from Nigeria’s regional prospects add to the sector’s monetary pressure. Below the West African Energy Pool (WAPP) framework, Nigeria exports electrical energy to neighbouring international locations to assist regional energy stability and earn international change. Nonetheless, irregular remittances from accomplice utilities have left Nigeria successfully subsidising cross-border provide.
For comparability, West African friends have carried out greater home tariffs that extra intently align with their CRT, lowering the necessity for large-scale authorities subsidies. The common $0.19/kWh charged in these international locations permits utilities to get well prices and spend money on community growth with out heavy fiscal assist.
Against this, Nigeria’s strategy has maintained client affordability however on the expense of public funds. The NERC report means that with out gradual alignment of tariffs with CRT, the subsidy invoice will stay a big drain on the nationwide finances.
