Nigeria cuts electricity subsidy burden by 35% after tariff hike

Nigeria has reduced its electricity subsidies by 35% following a targeted tariff hike for high-use consumers, according to Power Minister Adebayo Adelabu.

Previously, the government was spending nearly N200 billion ($125 million) monthly to keep tariffs low. In 2023, it removed subsidies for the top 15% of consumers, mainly high-usage households and businesses, helping the market generate an additional N700 billion in revenue, a 70% increase.

The move has eased the state’s financial strain, cutting the tariff shortfall from N3 trillion to N1.9 trillion. It also contributed to slight gains in power generation.

Despite this progress, Nigeria’s power sector remains troubled. Of its 13 GW installed capacity, only about a third is typically produced, forcing many to rely on costly backup power.

In response, the Nigeria Sovereign Investment Authority (NSIA), Sustainable Energy for All (SEforALL), the International Solar Alliance (ISA), and Africa50 have launched the $500 million Distributed Renewable Energy (DRE) Nigeria Fund. The fund will finance mini-grids, solar home systems, commercial and industrial power solutions, embedded generation, and energy storage projects.