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Electricity tariff hike is a costly band-aid for Nigeria’s energy crisis

The Nigerian government is considering a 66% increase in electricity tariffs to ₦193.63/kWh from ₦116.18/kWh, aiming for cost-reflective pricing to ease liquidity challenges in the power sector. If implemented, this will be the second tariff hike since the last hike of 230% for Band A users in April 2024. Before this, subsidies have kept electricity costs artificially low, but mounting fiscal constraints have made this approach unsustainable. However, while a possible tariff increase may provide short-term financial relief for the government, it does little to address Nigeria’s persistent energy crisis. Instead, they come at a steep cost for businesses and consumers already grappling with inflation and weak purchasing power.

SMEs—the backbone of the economy—will face rising operational costs. Worse, the power supply remains grossly inadequate, forcing industries to rely on expensive alternatives like diesel and gas. Without a substantial expansion in energy generation, tariffs merely shift financial pressure onto consumers and businesses rather than addressing Nigeria’s fundamental power shortages.

Coal is dirty power that cannot be ignored

Nigeria’s power crisis is more than an inconvenience—it’s an economic emergency. 14 national grid collapses in 13 months since February 2024, and daily electricity generation remains stuck around 4,000 MW for a population of over 200 million people. This is despite an installed capacity of 13,000 MW. The energy shortfall remains a major impediment to economic growth as industries continue to operate far below capacity.

Yet, Nigeria sits on 2.75 billion metric tonnes of untapped coal reserves, a resource that could generate up to 53,900 MW if fully harnessed. While global energy trends favor renewables, leading economies like China still rely on coal for over 60% of their electricity, using advanced, cleaner technologies to drive industrialization and energy security. By adopting modern, cleaner coal technologies, Nigeria has a viable path to power its industries, create jobs, and drive economic transformation. The real question is—can we afford to keep overlooking this opportunity?

In this latest edition of Whispers, the FDC Think Tank takes a deep dive into recent economic developments and their impact on your business and corporate strategy.

Enjoy your read!