Tariff Politics, N4trn Debt, Fragile Infrastructure Threaten Sustainability, Even As Operators Map Cautious Paths To Recovery
Nigeria’s electricity sector, led by Honourable Minister of Power, Chief Adebayo Adelabu, sits at the heart of its economic ambition, yet it remains one of the most contested and complex reform spaces in the country. From tariff politics to mounting debt and fragile infrastructure, the power industry reflects the broader tension between economic realism and social sensitivity. Enam Obiosio examines why reform momentum has slowed, how a N4 trillion liquidity hole threatens sustainability, and why cautious optimism is emerging among operators who believe coordinated action and financial discipline can still reset the sector’s trajectory.
A Policy Agenda Under Fresh Pressure
Nigeria’s long-running electricity reform programme is once again under pressure. Tariff politics, deep structural weaknesses and a worsening liquidity crisis are combining to stall progress in a sector critical to economic growth, industrial competitiveness and household welfare.
These concerns were laid bare in a policy brief issued on December 14, 2025 by the Centre for the Promotion of Private Enterprise (CPPE) and signed by its Chief Executive Officer (CEO), Mr. Muda Yusuf. Titled: Nigeria’s Power Sector Reform: Managing Complexity, Liquidity, and Political Economy Constraints, the brief warns that despite repeated interventions, electricity remains one of the most challenging segments of Nigeria’s economic reform agenda.
According to the document, the sector’s problems are multidimensional, cutting across tariff distortions, political economy constraints, weak investor capacity, transmission bottlenecks and a persistent liquidity crisis that ripples through the entire value chain.
The tariff dilemma
At the centre of the crisis is the difficulty of implementing a fully cost-reflective tariff regime. Electricity tariffs remain capped, largely due to social and political sensitivities that have intensified following recent macroeconomic reforms, including foreign exchange unification and fuel subsidy removal.
The policy brief notes that without cost-reflective pricing, the sector cannot generate sufficient liquidity to sustain operations or attract new investment. The result has been entrenched subsidy dependence and a widening financing gap, forcing the government to intervene repeatedly to prevent system collapse and keep power flowing to homes and businesses.
CPPE estimates that sector liabilities have risen to nearly N4 trillion, a trajectory it describes as fiscally unsustainable without deeper structural corrections, improved transparency and a credible, phased reform pathway.
Structural cracks beneath the surface
Beyond pricing, the brief highlights structural weaknesses rooted in the post-privatisation landscape. These include the technical and financial capacity of some private investors, transparency and due diligence gaps during the privatisation process, and weak governance and operational inefficiencies, particularly among distribution companies and the Transmission Company of Nigeria.
Transmission Company of Nigeria, which remains fully government-owned, is described as a major bottleneck. Operational inefficiencies, inadequate investment and slow network expansion continue to constrain generation capacity utilisation and system reliability.
While recent efforts under the Presidential Power Initiative have reduced the frequency of grid collapse, CPPE argues that transmission weaknesses still exacerbate liquidity and service delivery challenges across the value chain.
A liquidity crisis that feeds on itself
Financial distress in one segment of the power industry quickly transmits to others. Generating companies struggle to pay gas suppliers, while distribution companies are unable to generate enough revenue to meet their obligations to generators. Confidence weakens, investment stalls, and the cycle deepens.
In the short term, CPPE concedes that government financial intervention has become inevitable. Recent bond issuances aimed at settling outstanding obligations to gas suppliers and generation companies are seen as necessary to prevent a breakdown of electricity supply.
However, the think tank stresses that such interventions must be time-bound, transparent and linked to measurable reform milestones to limit fiscal exposure and avoid repeating the mistakes of past subsidy regimes.
Signs of cautious progress
Despite the headwinds, CPPE identifies areas of incremental progress. A rapid move to full subsidy removal may be politically unrealistic, but phased reform is gaining ground. The introduction of differentiated tariff bands such as Band A, increased decentralisation with states assuming greater regulatory roles, the expansion of independent power projects, and rising adoption of renewable energy at household and enterprise levels are easing pressure on the national grid.
Still, the brief warns that the current financing model remains unsustainable. Outstanding claims must be properly verified, subjected to rigorous audit and managed transparently to restore confidence and discipline.
Operators map a path forward
Amid policy uncertainty, industry operators are beginning to articulate growth strategies anchored on collaboration, technology and financial discipline.
The Group Managing Director of Sahara Power Group, Kola Adesina, says Nigeria’s power sector is gradually repositioning for stability, supported by reform-driven investment and expanding cooperation among stakeholders.
According to him, collaboration involving the Federal Government, the power ministry, regulators, operators, the Central Bank of Nigeria, commercial banks and multilateral development partners has reached an unprecedented level and is expected to deepen in 2026.
“We are witnessing unprecedented collaboration involving the Federal Government, Power Ministry, Regulatory Agencies, Power Entities, CBN, banks and multilateral financial and development agencies,” he said, adding that the alignment of interests should translate into greater efficiency, sustainability and improved electricity supply.
Infrastructure, finance, and execution
Sahara Power accounts for about 19 percent of Nigeria’s total power generation through subsidiaries including Egbin Power Plc, First Independent Power Limited and Ikeja Electric.
Mr Adesina disclosed plans to increase dispatched generation capacity to between 6,500 and 7,000 megawatts, alongside the launch of a data centre to support operational expansion, real-time analytics and predictive maintenance. Over the next three to five years, the group plans to invest heavily in gas and renewable energy to deliver affordable and sustainable power.
On financing, he said Sahara Power has already paid the naira equivalent of $438 million, representing 73 percent of its original $600 million loan, despite liquidity pressures in the sector. Existing loans, contractually due for full repayment in 2034, are being serviced in line with agreed terms.
He added that government-led legacy debt payments are critical to settling obligations to banks, gas suppliers and service providers, and will enable operators to accelerate growth plans.
Metering and revenue assurance
Improved metering is emerging as a key pillar of reform. Data from the Nigerian Electricity Regulatory Commission show that more than 2.3 million meters have been deployed nationwide under the National Mass Metering Programme since 2020. The expansion is expected to narrow the metering gap, strengthen revenue assurance and improve customer trust.
Industry experts note that these steps, combined with stricter performance benchmarks for distribution companies and possible alternative management or concession models for transmission, could gradually stabilise the value chain.
Reform as a long game
CPPE’s core message is that power sector reform is not a quick fix. The sector’s complexity, political sensitivities and institutional weaknesses mean progress will be incremental. Yet without decisive action to address structural inefficiencies, strengthen governance and enforce fiscal discipline, the current trajectory remains unsustainable.
The choice facing policymakers is stark. Continue absorbing inefficiencies onto the public balance sheet, or pursue a transparent, predictable reform roadmap that balances economic reality with social protection.
As Nigeria enters 2026, the electricity sector stands at a crossroads. The direction it takes will shape not only investor confidence and industrial output, but the everyday experience of households and businesses that depend on reliable power to function.
