There is something deeply absurd about Nigeria boasting that it has the cheapest electricity tariff among 14 African countries when millions of Nigerians still have to buy petrol and diesel to produce the electricity they are supposedly paying for. According to the Nigerian Electricity Regulatory Commission (NERC), Nigeria’s average allowed end-user electricity tariff was just N124.30 per kilowatt-hour in 2025—the lowest among the 14 African countries examined in its comparative review. Countries such as Ghana, South Africa, Kenya and Côte d’Ivoire charge significantly more. But here is the inconvenient question NERC’s headline statistic cannot answer: what is the value of cheap electricity that does not reliably exist?
For a Nigerian household running a generator after the national grid disappears, N124.30 is hardly the real price of electricity. For a manufacturer powering a factory with diesel because grid supply is too unreliable for industrial machinery, it is certainly not the real price. And for the small business owner whose refrigerator, welding machine, computer or other equipment is damaged by unstable voltage, the tariff on the electricity bill is only a fraction of the actual cost.
Nigeria may have cheap electricity on paper. What Nigerians have in reality is expensive darkness. That is the central contradiction exposed by NERC’s report—and it deserves far more scrutiny than a simple comparison of African tariffs. A statistic Nigeria should not be celebrating
The temptation for government is obvious. At a time when Nigerians are struggling with rising living costs, a low electricity tariff can be presented as evidence that the authorities are protecting households from economic hardship. But electricity is not cheap simply because the tariff is low. It is cheap only when the consumer receives a reliable service at that price.
Nigeria’s problem is that the cost of electricity has been pushed away from the utility bill and into virtually every other corner of economic life.
It is paid for at the filling station when a household buys fuel for its generator.
It is paid by manufacturers buying diesel.
It is paid by artisans who cannot work during outages.
It is paid by businesses forced to acquire alternative power systems.
It is paid through higher prices for locally produced goods.
It is paid through damaged appliances and machinery.
And it is paid by taxpayers when the government is forced to intervene to keep the electricity market from collapsing.
So the N124.30 tariff is not necessarily evidence of cheap electricity. It may be evidence that a large part of the electricity bill has been hidden elsewhere.
The subsidy that nobody escapes
NERC’s own assessment points towards the structural problem. For years, electricity tariffs for many consumers have been kept below the actual cost of supplying power. The introduction of Band A in 2024 represented an attempt to move higher-income consumers and industrial clusters towards more cost-reflective pricing, while consumers in Bands B to E continued to benefit from substantial discounts. The political logic is understandable. The economic logic is much harder to defend indefinitely.
When the selling price does not cover the cost of producing and delivering the product, the shortfall has to be absorbed somewhere. In Nigeria, that burden has increasingly landed on the power companies, the government and, ultimately, the public purse. The report identifies the consequences: thermal generation depends heavily on commercial gas, generation costs have been affected by the devaluation of the naira, and gas suppliers have cut supplies to power stations over unpaid bills running into hundreds of billions of naira. The government has had to bridge tariff shortfalls to prevent further deterioration of the electricity market.
This is not a sustainable business model.
A government cannot indefinitely borrow, tax or reallocate scarce resources to subsidise an electricity system without fixing the economics that created the deficit in the first place. Every naira spent repeatedly plugging an operational hole is a naira that cannot be deployed elsewhere. The choice is particularly painful in a country with enormous infrastructure deficits.
But don’t make Nigerians pay for failure
Yet, an equally dangerous argument is emerging from the tariff debate: that Nigerians should simply be told to pay the “true cost” of electricity and everything will suddenly work. It will not. Cost-reflective tariffs are necessary for a financially sustainable electricity market. But cost-reflective pricing without performance accountability is simply a more sophisticated way of transferring inefficiency to consumers.
This is where NERC and the distribution companies must face uncomfortable questions. Why should customers accept higher tariffs when many distribution networks remain characterised by obsolete transformers, defective poles and overloaded feeder lines?
Why should communities raise money to buy transformers and repair electricity infrastructure that should be part of the utility’s responsibility? And why should consumers be expected to demonstrate greater willingness to pay when the quality remains uncertain? The report itself acknowledges these deficiencies. It notes that distribution companies have struggled to invest in basic network infrastructure, while customers endure voltage fluctuations and other service problems. The message to the regulator should therefore be blunt: Do not ask Nigerians to pay more for the privilege of remaining dissatisfied. If tariffs go up, service standards must go up with them.
The DisCos cannot have it both ways
The 11 distribution companies took over the country’s retail electricity networks in 2013 with expectations of improved efficiency and investment. More than a decade later, the electricity market remains trapped in a cycle of weak revenues, inadequate investment, poor service and consumer dissatisfaction. It is time to end the culture in which every problem is presented as a reason for consumers to pay more.
The DisCos are businesses. Businesses must invest. Businesses must improve productivity. Businesses must collect revenue efficiently. Businesses must provide a service that customers are willing and able to pay for.
Consumers, too, have obligations. But the relationship cannot be one-sided. A customer cannot reasonably be told: pay more because the electricity is expensive to produce, while the utility simultaneously says: we cannot provide reliable electricity because customers are not paying enough. That circular argument has kept Nigeria’s electricity market in paralysis. The regulator must break it. Tariff increases should be linked to verifiable performance indicators, including minimum supply hours, voltage, outage response and network investment. No performance, no automatic reward.
Estimated billing: the other scandal
Another glaring weakness in the system that the tariff debate cannot ignore: metering. The report says more than half of registered electricity consumers still receive estimated bills. That is a recipe for distrust. How can a modern electricity market expect consumers to embrace cost-reflective tariffs when many customers cannot accurately establish how much electricity they actually consumed?
Estimated billing has turned the electricity bill into a source of confrontation rather than a transparent commercial transaction. When consumers receive bills they believe do not correspond with their actual consumption, disputes follow. Collection suffers. Revenue falls. Utilities complain about non-payment. Investment declines. The cycle continues. Nigeria should stop treating universal metering as an aspiration. Every electricity consumer should have a functional meter. Full stop. Until that happens, tariff reform will remain politically vulnerable because consumers will understandably suspect that they are being asked to pay for someone else’s inefficiency.
Manufacturers are already paying the real tariff
The greatest indictment of Nigeria’s electricity system is found not in household bills but inside factories. A manufacturer does not care that Nigeria has Africa’s lowest official electricity tariff if the factory floor cannot operate reliably on grid power. The report says manufacturers increasingly resort to diesel generators and independent power systems and that self-generated electricity can cost substantially more than grid electricity in countries such as Ghana and South Africa. That is a national competitiveness crisis.
Every litre of diesel burned to compensate for unreliable grid power adds to the cost of Nigerian production. The consequences travel down the economic chain.
The manufacturer raises prices.
The consumer pays more.
Exports become less competitive.
Investment becomes less attractive.
Factories struggle to expand.
Jobs that should have been created are lost.
And Nigeria’s ambition to become a serious manufacturing and export economy becomes harder to achieve.
The African Continental Free Trade Area makes this problem even more urgent. Nigeria cannot expect its manufacturers to conquer African markets while forcing them to compete against companies operating in countries where electricity is more predictable.
State electricity markets could change the game
However, a potential escape route exists. Nigeria’s move towards decentralised electricity markets could help break the monopoly of a single national model. States such as Lagos, Edo and Kaduna are developing electricity markets involving private generation, mini-grids and distribution arrangements designed to serve particular communities and industrial areas. This is one of the most important developments in Nigeria’s power sector. The country does not have to insist that every consumer receive electricity through the same model.
Industrial clusters can support dedicated generation.
Commercial districts can develop embedded power systems.
Remote communities can be served through mini-grids.
States with strong investment potential can attract private capital into electricity generation and distribution.
But decentralisation is not a magic wand.
The danger is that investors will naturally gravitate towards wealthy urban consumers who can pay cost-reflective tariffs, leaving poorer communities behind. If that happens, Nigeria could end up with pockets of world-class electricity surrounded by large areas of energy poverty. The national transmission network must therefore remain a strategic public priority.
The reform Nigeria actually needs
The answer is not another tariff announcement. Nigeria needs a comprehensive electricity bargain. Government must gradually remove economically destructive blanket subsidies, but replace them with targeted support for genuinely vulnerable households. NERC must enforce strict service standards and make tariff increases conditional on performance. Distribution companies must invest in their networks and face meaningful penalties when they fail to meet agreed obligations. Metering must become universal and transparent. Gas suppliers and power generators must operate within a commercially credible payment framework.
Transmission infrastructure must receive sustained investment. States should be encouraged to develop viable electricity markets while ensuring that rural and poorer communities are not abandoned. And consumers must also be part of the bargain. Electricity theft and deliberate non-payment cannot be tolerated in a commercially sustainable market. Above all, the country needs to abandon the politics of pretending that electricity can be made cheap simply by declaring a low tariff.
Stop celebrating cheap darkness
The NERC report has inadvertently exposed one of the great illusions of Nigeria’s electricity debate. The country does not necessarily have cheap electricity. It has a cheap official tariff attached to an expensive electricity system. The difference is enormous.
Nigerians are already paying the price for unreliable electricity—just not always on their electricity bills. They pay the hidden tariff every time they buy generator fuel. Every time a factory switches from the grid to diesel. Every time an appliance is destroyed by voltage instability. Every time a business loses an afternoon of production. Every time government diverts public money to cover a sector that cannot sustain itself commercially. That is why the real question is not whether Nigeria should preserve the continent’s lowest electricity tariff. The real question is whether Nigerians are prepared to continue paying the much higher hidden tariff of darkness. The answer should be no.
Nigeria should stop pursuing the political comfort of cheap electricity and start building the economic foundation for reliable electricity at a fair and transparent price. Because in the final analysis, N124 electricity that barely flows is not cheap electricity. It is an expensive national illusion.