Tariffs Without Power: The Broken Promise of Electricity Reforms in Nigeria

Nick Agule

Why Telecoms Privatisation Succeeded While Power Sector Privatisation Struggles in Nigeria

Before 2001, Nigeria had just 500,000 telephone lines serving over 100 million people. The demand far outstripped supply, making access to phones expensive and exclusive. Racketeering was rampant, and even a former Minister of Telecommunications implied that “telephones were not for the poor.”

That narrative changed dramatically in 2001 when the federal government liberalised the telecoms sector. Private operators were licensed and, recognising the massive demand, invested aggressively to expand the network. Since then, over $100 billion has been invested, and active telephone lines have skyrocketed from half a million to over 220 million today. Importantly, these operators did not wait for cost-reflective tariffs to invest—they thrived on volume, not price. The result? Nigerians now pay much less for telecommunications than during the NITEL era, with significantly better availability and service.

Power Sector Privatisation: A Different Story

In 2013, the federal government privatised the electricity sector, selling off generation companies (GENCOs) and distribution companies (DISCOs) to private investors. However, it retained ownership of the Transmission Company of Nigeria (TCN). Although transmission operations were briefly handed to Manitoba Hydro International (Canada), this was later reversed.

At the time of privatisation, Nigeria generated about 6,000 megawatts of electricity. Twelve years later, that number has declined, hovering between 3,000–5,000 megawatts. In stark contrast to telecoms, electricity supply has worsened post-privatisation.

Why Did Power Sector Privatisation Fail?

The main difference lies in investment. While telecoms companies poured billions into infrastructure, power sector operators did not. Electricity output has declined rather than increased. With proper investment, Nigeria could have been generating 25,000 megawatts or more by now—thus reducing tariffs and improving availability. By global rating, 1,000 megawatts is to serve one million people therefore Nigeria with over 200 million people is expected to be supplying 200,000 megawatts but currently doing only 5,000 megawatts. Rather than committing billions of dollars to expand supply and tap into the massive power deficit, power sector companies have focused primarily on tariff increases.

So why haven’t the power companies invested?

The Capital Problem

Most of the DISCOs simply lack the capital. A review of their filings at the Corporate Affairs Commission (CAC) shows that the total share capital of all 11 DISCOs is less than ₦1 billion—about $583,000. Below is a breakdown of their capital:

SN	DISCO	Capital (₦)	Capital (USD*)
1	Abuja	₦15m	$10,000
2	Benin	₦5m	$4,000
3	Eko	₦200m	$140,000
4	Enugu	₦10m	$7,000
5	Ibadan	₦10m	$7,000
6	Ikeja	₦100m	$70,000
7	Jos	₦500m	$350,000
8	Kaduna	₦10m	$7,000
9	Kano	₦10m	$7,000
10	Port Harcourt	₦10m	$7,000
11	Yola	₦5m	$4,000

*USD values are approximated

Rising Costs, Static Supply

Despite declining output, electricity costs have risen sharply. Why?

1. Loan Repayments: To pay for the licences in 2013, DISCOs borrowed nearly $1.5 billion at an exchange rate of ₦155/$1. With today’s rate around N1,500/$1, they now face over N2.25 trillion in loan repayments, up from N232.5 billion. These escalating costs from foreign exchange losses are being passed to consumers without any increase in power supply.
2. Inefficient Structure: Before privatisation, PHCN (formerly NEPA) was the sole provider of 6,000 megawatts. Today, there are 46 entities—33 GENCOs, 11 DISCOs, 1 TCN, and 1 NBET—yet they collectively generate less electricity than PHCN did. Consumers now are forced to bear the cost of operating this bloated structure with high tariffs to generate enough revenues to meet these costs from only 5,000 megawatts! Consumers have gone from paying for one Managing Director under NEPA to footing the bill for 46 Managing Directors across the power sector—yet they’re receiving even less electricity than before. The system is clearly broken.

A Minister Serving the Companies, Not the People?

The current Minister of Power appears aligned with industry operators, pushing for tariff hikes instead of enforcing investment. In 2023, he approved a 250 per cent increase for Band A customers (from N65/kWh to N225/kWh)—all without any new generation, transmission and distribution capacity. Despite supplying no more than a 5 per cent increase in electricity, the power sector cashed in with a 70 per cent revenue hike, according to the Minister’s own report. There are indications that the Minister may soon approve another round of tariff increases, still based on the same stagnant 5,000 megawatts of electricity supply! Even worse, while consumers pay higher tariffs, they are still expected to buy their own meters, transformers, and pay for repairs.

What Should the Minister Do?

To truly serve Nigerians, the Minister must refocus on reform, not liquidity. Here’s how:

1. Distribution Reform

• Require DISCOs to invest in infrastructure, just like telecom companies did.
• In telecoms: Licence → $285m; Investment → $100bn; Success through scale.
• In power: Licence → $100m; Investment → Almost none; Failure due to stagnation.
• If DISCOs won’t invest, revoke and re-award licences to global companies with the capital and technology to deliver.

2. Transmission Reform

• TCN is underfunded and outdated—some equipment are 50 years old.
• Instead of unbundling into regional grids (which also needs funding) which the Minister offers as a solution, the private sector should fund and manage transmission.
• National security concerns are not valid—telecoms are private and pose greater risks yet are secure.

3. Generation Reform

• Privatise the 10 NIPP power stations managed by the Niger Delta Power Holding Company (NDPHC) to unlock the 5,000 megawatts of unused generation capacity.
• Secure steady gas supply to thermal plants. It’s unacceptable to flare gas while plants remain idle starved of gas.

4. Management Clarity

• The Minister should stop acting like a power sector company executive.
• Focus on policy and oversight—leave business operations to the private sector.

5. State Collaboration

• Support states in domesticating the 2023 Electricity Act.
• Promote renewable energy solutions (solar, wind, hydro) that can serve local communities directly—reducing reliance on national transmission.

Conclusion

In a recent interview, the Minister cited liquidity and political will as the power sector’s main problems. But liquidity won’t be solved by higher tariffs—it requires real investment to grow output.

The Minister must show political will to:

• Restructure transmission,
• Enforce investment in generation and distribution,
• Empower states, and
• Attract global expertise.

Nigeria, with a population of over 200 million, generates just 5,000 megawatts of electricity. Meanwhile, Qatar, with 3 million people, supplies 10,000 megawatts. If the severe electricity shortfall persists, meaningful economic progress in Nigeria will be sadly unattainable despite the huge resource endowment.

.Nick Agule is a chartered accountant and a Nigerian citizen passionate about the country’s economic development and the eradication of poverty.