Stable electricity unlikely without cost-reflective tariffs — FG

The Nigerian government has emphasized the necessity of cost-reflective tariffs for a dependable electricity supply, warning that consumers should not shoulder the burden of inefficiencies in the power sector. Speaking at the Lagos Energy Summit 2026, the Special Adviser to the President on Power, Lanre Babalola, outlined steps to make Nigeria's electricity market more attractive to investors.

Babalola, represented by a member of the Presidential Task Force on Power Sector Reset and Restoration, Engr Uzoma Achinanya, highlighted the need for reforms that ensure power generators and their gas suppliers receive payment for the power and fuel they provide. The PUNCH reports that, apart from Band A customers, other electricity users benefit from government subsidies, contributing to liquidity crises that have plagued the sector for decades.

To address this, the government is exploring revenue ring-fencing and credit enhancement arrangements to safeguard investments in new electricity generation and tackle persistent liquidity issues. Babalola stressed the importance of tariffs that accurately reflect costs rather than imposing inefficiencies on consumers. He emphasized that previous efforts had focused on delivering power to consumers while overlooking the financial arrangements needed to ensure generators and gas suppliers receive payment.

Babalola cautioned that without both circuits functioning, power could stop flowing to customers if the revenue to pay for it does not follow. The presidential adviser advocated for bilateral contracts with secure payment arrangements, including escrow accounts, payment waterfalls, and transparent revenue collection, to guarantee that funds reach generators and gas suppliers.

Regarding investment protection, Babalola called for credit enhancement to support electricity market participants, with government-backed support being recovered from market revenues rather than becoming a long-term financial strain on taxpayers. Meanwhile, the Minister of Power, Joseph Tegbe, presented a four-point roadmap to tackle Nigeria's electricity challenges, which includes grid stabilization, sector liquidity and sustainability, asset optimization, and grid expansion.

He reported that many power units affected by recent outages had returned to service, and the Egbin-Benin transmission line had been repaired. Tegbe stated that electricity supply to Lagos reached approximately 1,000 megawatts during the recovery and that the government is collaborating with various stakeholders to address interruptions affecting consumers.

Lagos State's Commissioner for Energy and Mineral Resources, Biodun Ogunleye, underscored the critical need for sustainable electricity investment in the state, whose estimated electricity requirements exceed 12,000MW, while conventional grid supply remains below 1,000MW. Ogunleye noted that Lagos has responded to the opportunities presented by the Electricity Act 2023 by enacting the Lagos State Electricity Law and establishing several regulatory bodies to strengthen investment, market operations, infrastructure development, and consumer protection.

He highlighted the state's Seven-Point Energy Agenda, which aims to unlock additional electricity supply, bolster infrastructure, attract investment, enhance service delivery, and build a commercially sustainable Lagos Electricity Market.