Beyond the 80.7% Illusion: Why Nigeria’s Power Sector “Progress” Masks a Deepening Crisis
Recent regulatory reports on the Nigerian electricity industry have been widely celebrated in the media, largely on the back of a reported 80.7 per cent revenue collection efficiency. However, this narrow focus on marginal gains in billing and collections obscures a far more troubling reality: a power sector trapped in systemic inefficiency, economic distortion, and creeping de-industrialisation.
By amplifying headline statistics without interrogating their substance, the media risks endorsing a regulatory narrative that inverts sound economic principles, subsidises inefficiency, and undermines national productivity. Several industry analysts have identified fundamental flaws that must be addressed before Nigeria can claim genuine progress in its electricity sector.
1. Arithmetic Manipulation, Not Economic Pricing
One of the most glaring weaknesses in Nigeria’s power sector regulation is the absence of true cost-of-service pricing. Rather than starting from the efficient cost of generating, transmitting, and distributing electricity, tariffs are derived from agreed revenue targets. Operators’ projected revenues are divided by energy supplied, and the resulting figure is presented as a “cost-reflective” tariff. This approach is not economics; it is mere accounting.
By allowing operators to embed their inefficiencies—technical losses, energy theft, and operational waste—into tariffs, the system violates a basic economic principle: consumers should pay for electricity delivered, not for inefficiencies tolerated by regulators. True cost discovery must be based on efficient, best-practice operations, not on balancing the books of failing utilities.
2. The Economic Absurdity of Service-Based Tariffs
Nigeria’s Service-Based Tariff (SBT) regime, which prices electricity according to hours of supply under Bands A to E, has little grounding in orthodox economic theory.
Globally, large industrial consumers are the cheapest to serve due to high-voltage connections and economies of scale. In Nigeria, this logic is reversed. Band A customers—often industrial and productive users—are charged the highest tariffs, not because they cost more to serve, but because they are perceived as able to pay more.
This structure effectively imposes a tax on productivity. By linking improved supply to sharply higher tariffs, the system discourages industrial consumption, forces factories to shut down or pass costs to consumers, and directly fuels inflation. Residential users are impoverished, while industries are pushed toward self-generation or outright exit.
3. Subsidising Inefficiency, Not Electricity
The federal government’s ₦458.75 billion electricity subsidy is often portrayed as social protection. In practice, it functions largely as an inefficiency subsidy.
Celebrating collection efficiency while ignoring Aggregate Technical, Commercial, and Collection (ATC&C) losses is a regulatory sleight of hand. These losses occur before billing and represent electricity that is stolen, wasted, or lost in dilapidated networks.
Because regulators fail to impose meaningful sanctions on operators for technical and commercial losses, both government and consumers end up paying for power that was never delivered. Subsidies and higher tariffs on productive users effectively shield Transmission Company of Nigeria (TCN) and DisCos from the consequences of poor performance.
4. Competitive Disadvantage and Regional De-industrialisation
Nigeria’s tariff regime places its industries at a severe disadvantage within Africa.
For example, Nigeria competes directly with Ethiopia in sesame seed and oil processing. Yet while Nigerian industrial customers face tariffs of about $0.16 per kWh, Ethiopian manufacturers pay between $0.02 and $0.05 per kWh. Similar disparities exist between Egypt and South Africa.
Such gaps make Nigerian-manufactured goods uncompetitive under the African Continental Free Trade Area (AfCFTA), effectively exporting jobs and industrial opportunities to rival economies. Rather than supporting domestic value addition, Nigeria’s power pricing framework accelerates de-industrialisation.
5. Moving Beyond Glib Statistics
If the electricity sector is to support economic growth, regulatory focus must shift from revenue recovery to operational efficiency.
First, NERC must undertake transparent, bottom-up cost audits to establish the true efficient cost of supplying power, excluding the cost of operator negligence. Second, enforceable loss-reduction targets must be imposed, with ATC&C losses borne by operators, not consumers. Finally, the service-based tariff model must give way to a productive tariff structure that supports industrial growth and social equity.
Conclusion
Nigeria’s current power-sector framework does not chart a credible path out of the electricity crisis. Instead, it perpetuates a system that rewards inefficiency, penalises productivity, and undermines national development. Until regulation confronts these structural failures, claims of progress will remain little more than an illusion.
