n a significant departure from the norm, the Enugu State Electricity Regulatory Commission (EERC) recently implemented a tariff reduction, cutting electricity prices by nearly 23% to N160 per kilowatt-hour (kWh). This move sharply contrasts with the federal average tariff of N208 per kWh and exposes the widespread distortions and inefficiencies plaguing Nigeria’s power sector.

Enugu’s approach, grounded in rigorous data audits and cost-reflective pricing, offers a compelling example of what could be achieved nationwide if similar reforms were adopted. The stark disparity between Enugu’s tariff and the national average reveals an outdated, opaque pricing system that has unfairly burdened consumers for years.

The Burden of Unreliable Power and Escalating Costs

Despite years of tariff increases, Nigerians continue to face unreliable electricity supply, forcing many households and businesses to rely heavily on expensive alternatives like diesel generators. This dependency not only inflates household budgets but also erodes business competitiveness, with electricity costs reportedly accounting for over 40% of operating expenses for manufacturers, according to the Manufacturers Association of Nigeria.

The reality is so dire that even the Presidential Villa has invested N10 billion in solar power to escape the unreliable national grid. Such a scenario underscores the critical failures in Nigeria’s electricity delivery and calls into question the rationale behind soaring tariffs without corresponding improvements in service quality.

Regulatory Failures and the Role of NERC

The Nigerian Electricity Regulatory Commission (NERC), the industry’s watchdog, has long been expected to protect consumers and enforce accountability among distribution companies (DisCos). Yet, the reality paints a different picture. NERC has largely failed to compel DisCos to improve service delivery or justify the high costs passed onto consumers.

This regulatory laxity allows DisCos to exploit systemic weaknesses, resulting in inflated tariffs and poor service. With nearly 40% of generated power lost annually due to technical inefficiencies, theft, and insufficient metering, the sector is trapped in a vicious cycle where consumers pay more but receive less.

The Metering Deficit and Lack of Transparency

Metering remains a significant challenge, with only about 45% of consumers accurately metered nationwide. Without reliable meters, billing is often based on estimates rather than actual consumption, leading to consumer distrust and billing disputes.

This metering deficit contributes to substantial revenue losses and hampers efforts to improve sector transparency. Enugu’s success in implementing a tariff cut was partially attributed to detailed audits and transparent cost calculations—steps sorely missing in many other states.

DisCos’ Inefficiencies and Questionable Practices

DisCos have repeatedly hidden behind high Band A tariffs and estimated billing to mask their inefficiencies. The lack of investment in vital infrastructure such as transformers, lines, and meters, coupled with weak billing and collection practices, has significantly worsened the situation.

Moreover, managerial incompetence and the failure to adhere to licensing requirements further exacerbate the crisis. The fact that Mainpower, Enugu’s DisCo, has not opposed the tariff cut—despite still maintaining profitability—raises serious questions about NERC’s opposition and the broader sector dynamics.

Rising Tariffs, Collection Gaps, and Financial Instability

Data from NERC reveals that DisCos billed customers N761.91 billion in the first quarter of 2025, a 106.68% increase from the previous year. However, actual revenue collected was only N559.3 billion, representing a collection efficiency of just 73.4%. This revenue shortfall, primarily caused by poor metering and billing practices, undermines the financial viability of DisCos and fuels ongoing tariff hikes.

Emerging Trends: States Taking Charge of Electricity Regulation

In response to federal regulatory shortcomings, several states—including Ondo, Edo, Benue, and Delta—have begun establishing independent electricity regulatory bodies. Lagos, Ogun, Niger, and Plateau are also preparing to follow suit.

This decentralization aligns with calls from industry experts to abandon the current “one-size-fits-all” tariff model. Instead, they advocate for a multi-tiered tariff system that reflects the diverse economic realities, infrastructure capacities, and energy goals across Nigeria’s states.

Proposed Multi-Tiered Tariff Models for Fairness and Efficiency

Experts propose several tariff structures tailored to local conditions, including:

• Cost-Reflective Tariffs: Ensuring full cost recovery for DisCos and generating companies (GenCos).

• Service-Based Tariffs: Linking charges directly to supply quality and hours of electricity delivered.

• Subsidized Lifeline Tariffs: Providing affordable electricity for low-income and underserved communities.

• Renewable-Driven Local Tariffs: Allowing states investing in mini-grid or off-grid renewable energy solutions to set tariffs based on local supply conditions.

• Performance Contracting Models: Tying tariffs to agreed performance benchmarks between states and service providers.

Such models promise greater transparency, efficiency, and fairness while empowering states to manage electricity generation and distribution within their domains, consistent with the Electricity Act.

The Unsustainable Federal Subsidy Regime and Calls for Accountability

The current federal subsidy regime, which consumes trillions of naira annually, has failed to address core structural inefficiencies. The Tinubu administration’s plan to issue a bond to offset an estimated N4 trillion in unpaid subsidies underscores the fiscal unsustainability of the status quo.

Meanwhile, several DisCos have faced financial crises leading to bank takeovers or management by agencies like AMCON due to mounting debts. The recent sale of Ibadan DisCo for N100 billion ($64.5 million), criticized for undervaluation, highlights the troubled nature of privatization efforts.

The Need for Competent Investors and Market Competition

Privatization at the distribution level has largely failed because many investors prioritized quick returns over long-term infrastructure investments. The sector is reportedly undercapitalized by around N2 trillion, severely hampering the ability to improve supply quality.

A reset is urgently needed to attract technically competent, well-capitalized, and customer-focused investors who can deliver better service. Additionally, introducing multiple DisCos to operate concurrently in the same zones would foster healthy competition and offer consumers real choices.

Conclusion: Enugu’s Experience as a Blueprint for Reform

Enugu’s successful tariff reduction demonstrates that regulatory autonomy, transparency, and cost discipline can protect consumers and hold DisCos accountable. It sends a clear message that the current centralized, opaque system is unsustainable.

For Nigeria’s power sector to support economic growth and development, fundamental reforms are essential. This includes restructuring tariffs to reflect actual costs and service quality, enforcing rigorous regulation, addressing inefficiencies and metering gaps, and fostering competition.

Without such bold reforms, Nigerians will continue to pay high prices for unreliable electricity—impeding business growth, straining household budgets, and stalling national progress.