With N4.35trn Subsidy Debt, FG Plans Tariff Review For Band B, Others –Adelabu

The federal government of Nigeria is considering a review of electricity tariffs for Band B, C, D and E consumers, to address disparities in the current billing system and encourage investment in the power sector.

This move comes as the government grapples with a significant electricity subsidy debt burden of N4.35 trillion to generation companies (GenCos) and distribution companies (DisCos).
Minister of Power, Adebayo Adelabu, disclosed this in Abuja at the public presentation of the National Integrated Electricity Policy and the Nigeria Integrated Resource Plan.

The recent hike in Band A tariffs has already reduced the subsidy from about N3 trillion to N1 trillion, but the government still subsidises a large portion of electricity costs.

Adelabu emphasised the need for a more equitable pricing structure to ensure the sustainability of the power sector. The government’s financial constraints, including a proposed budget deficit of N13.08 trillion in 2025, underscore the urgency of revising electricity tariffs to reduce financial burdens. However, any tariff adjustments must balance economic realities with consumer affordability to avoid exacerbating economic hardships

He explained that the government is considering this adjustment due to the slow transition of customers to Band A, a situation he attributed to the reluctance of Distribution Companies to make the necessary investments.

Under the current tariff structure, customers in Band B, who receive between 17 and 18 hours of electricity daily, pay N63 per kilowatt-hour, while Band A customers, who enjoy just two additional hours of supply, are charged N209 per kilowatt-hour.

Describing this pricing system as “unfair,” Adelabu stressed the need for a more balanced and equitable tariff regime. He assured Nigerians that the review would not automatically mean an increase in tariffs but a reassessment to improve efficiency and investment in the sector.

The minister also revealed that the federal government owes electricity generation and distribution companies over N4 trillion in electricity subsidies.

Breaking down the figures, he stated that N2 trillion is owed to Generation Companies as legacy debt, while another N1.9 trillion is part of the electricity subsidy for 2024.
In addition, Distribution Companies are owed N450 billion in subsidies for the same period.

Adelabu warned that the government could not continue with the current subsidy model and that a new approach would be introduced to ensure that only those who genuinely need subsidies benefit from them. He questioned how power generation companies could be expected to function optimally when they are struggling to pay for gas, maintain their turbines, and pay staff salaries due to the huge outstanding debts.

Reflecting on the past year, Adelabu highlighted key milestones achieved in the power sector, including the development of the National Integrated Electricity Policy, the attraction of over $1 billion in investment, and progress towards the full commercialisation of the sector.

He noted that electricity generation had increased from an average of 4,200 megawatts to 5,300 megawatts, while the country’s transmission capacity expanded by over 600 megawatts through the Presidential Power Initiative. He also mentioned that N700 billion was raised from the Federation Account Allocation Committee to implement the Performance Management Initiative.

Looking ahead to 2025, he outlined the government’s key priorities for the power sector, which include improving market liquidity, implementing state-led electricity projects, strengthening the Transmission Company of Nigeria, and advancing the “Mission 300” initiative aimed at boosting electricity supply.