Amid mounting financial pressures and sectoral disagreements, several Nigerian states have initiated reductions in electricity tariffs, sparking a backlash from power generation and distribution stakeholders.
The moves follow a new pricing directive issued by the Enugu Electricity Regulatory Commission (EERC) to MainPower Electricity Distribution Limited, which slashed the Band A electricity rate from ₦209 per kilowatt-hour to ₦160/kWh, effective August 1, 2025.
This development, which has ignited wider adoption by other sub-national governments, has drawn strong objections from both generation companies (GenCos) and distribution companies (DisCos), who argue that such measures may jeopardize the sustainability of Nigeria’s already fragile electricity market. The GenCos assert that the industry is grappling with debts exceeding ₦5 trillion—debts which they claim are yet to be addressed comprehensively by the federal government or market regulators.
In a statement issued on Monday, Joy Ogaji, Chief Executive Officer of the Association of Power Generation Companies, criticized the EERC directive as an unrealistic deviation from the actual cost of electricity production. “The decision in Enugu has laid a dangerous precedent,” Ogaji remarked. “It only captures ₦45 out of ₦112 for generation costs, assuming that the federal government will absorb the shortfall through subsidies that have neither been formally approved nor financially backed.”
Despite these concerns, more states are aligning with Enugu’s policy direction. The Nigerian Electricity Regulatory Commission (NERC) recently confirmed that seven states—Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi—now wield autonomous control over their electricity markets under the Electricity Act of 2023. Additional states, including Lagos, Ogun, Niger, and Plateau, are in advanced stages of transitioning regulatory authority from federal to state control, expected to conclude by September.
The justification from these states is largely socioeconomic. In separate statements to the press, officials from Plateau and Ondo States reaffirmed their commitment to easing the financial burden of electricity on citizens. Lagos, Nigeria’s most populous state, indicated it is evaluating Enugu’s model and plans to unveil its own tariff strategy soon.
Ekiti State, however, has opted to retain the prevailing Multi-Year Tariff Order (MYTO) issued by NERC. Professor Bolaji Aluko, the state’s Commissioner for Infrastructure and Public Utilities, emphasized the need for financial sustainability in any reform. “While it’s commendable to consider reducing tariffs, we must ensure it won’t compromise consistent electricity delivery,” Aluko stated.
In Enugu, regulatory authorities maintain that the revised rate is a result of a data-backed, cost-reflective process that leveraged federal subsidies. EERC Chairman, Chijioke Okonkwo, stated during a media briefing that the commission undertook a comprehensive six-month review of MainPower’s tariff and licensing applications before arriving at the ₦160/kWh figure.
“Our tariff structure is based on a transparent cost model that accounts for inflation, infrastructure costs, energy losses, and federal subsidies,” Okonkwo said. He noted that the average cost of electricity delivery within MainPower’s network currently hovers just above ₦94/kWh, thanks to federal generation subsidies. However, he warned that should those subsidies be withdrawn, the cost could spike to over ₦112/kWh—pushing tariffs well beyond the current ₦160/kWh rate.
Still, power sector stakeholders are unconvinced. Ogaji pointed out that the federal government’s 2025 budget allocates only ₦900 billion for electricity sector support—an amount that falls significantly short of the annual ₦3 trillion needed to stabilize power generation. “The average monthly invoice for electricity generation alone stands at ₦250 billion,” she said. “There are no concrete plans involving debt swaps, financial instruments, or direct payments to close this gap.”
The situation remains tense as DisCos operating within these reform-minded states argue that tariff cuts without immediate compensation will undercut investor confidence. An anonymous official from a major Disco warned that if states fail to cover the resulting revenue shortfalls, it could lead to service degradation and regulatory challenges.
“Electricity, like any commodity, must be paid for,” the official stressed. “With Band A already unsubsidized at the federal level, if states choose to underprice it, they must fund the difference. Otherwise, it becomes an unsustainable drain on the system.”
This concern is further complicated by constitutional questions, with some stakeholders suggesting that any state-level regulation conflicting with federal mandates could be legally challenged and potentially nullified.
Plateau State Electricity Commission Chairman, Bagudu Hirse, said the commission would initiate its own tariff reduction plan in line with Governor Caleb Mutfwang’s energy reform agenda. Hirse emphasized that this policy direction was meant to align with the state’s goals of economic relief for citizens.
Meanwhile, Lagos State’s Commissioner for Energy and Mineral Resources, Biodun Ogunleye, said the state is reviewing Enugu’s tariff framework with caution due to the unique energy demands of the metropolis. “Lagos accounts for 50 percent of national electricity consumption,” he said. “Any drastic action without due diligence could threaten stability.”
In Ondo State, Commissioner Johnson Alabi revealed that the government was already implementing similar cost-control mechanisms but had yet to publicize them. He said the state has begun determining its own tariffs through direct energy procurement from the Transmission Company of Nigeria (TCN), a move uncommon among states.
Industry experts have also weighed in. Power sector analyst Tayo Adegbenle questioned the accuracy of EERC’s calculations, especially the assumption that federal subsidies would remain consistent. “Enugu wants autonomy but cannot ignore the liabilities that come with independence,” he said.
Another expert, Bode Fadipe, noted that the EERC’s move, though bold, may be strategic. “The broader impact remains to be seen. It’s possible this was a calculated push to trigger a national conversation on sub-national autonomy in electricity pricing,” he said.
As the debate unfolds, the future of Nigeria’s power sector hangs in the balance, with implications for consumers, investors, and regulators alike. Whether the state-led tariff reductions will prove to be a lifeline for citizens or a misstep in power sector reform remains to be seen.
