Nigeria’s electricity reform programme is facing a deepening crisis, with tariff politics, structural inefficiencies, and a ballooning N4 trillion debt threatening the sector’s long-term viability, according to a new policy brief by the Centre for the Promotion of Private Enterprise (CPPE).

Released on Sunday, the report — Nigeria’s Power Sector Reform: Managing Complexity, Liquidity, and Political Economy Constraints — was authored by CPPE CEO Dr. Muda Yusuf, who described the industry as “one of the most challenging segments of Nigeria’s economic reform agenda.”

Key challenges highlighted include:

• Political Economy Constraints: Resistance to cost-reflective tariffs amid rising living costs following fuel subsidy removal and naira float.
• Tariff Distortions: Capped pricing has entrenched subsidies, forcing repeated government bailouts that transfer inefficiencies to taxpayers.
• Investor Capacity Issues: Post-privatisation weaknesses in distribution companies (Discos), including limited technical and financial strength.
• Transmission Bottlenecks: Underinvestment and inefficiencies at the Transmission Company of Nigeria (TCN) continue to limit generation utilisation despite fewer grid collapses.
• Liquidity Crisis: Liabilities across the value chain have reached nearly N4 trillion, with Gencos unable to pay gas suppliers and Discos struggling to collect revenue.

Yusuf stressed that weaknesses in one segment cascade across the entire value chain, undermining reliability and investor confidence. While acknowledging short-term government interventions — such as bonds to settle Genco and gas debts — he warned these are “fiscally unsustainable” without deeper reforms.

Positive developments noted:

• Introduction of tariff bands (e.g., Band A for higher-service customers)
• Growing state-level decentralisation and regulatory roles
• Expansion of independent power projects (IPPs)
• Rising adoption of renewables by households and enterprises

CPPE’s key recommendations:

• Phased Tariff Roadmap: Gradual move to cost-reflective pricing with targeted subsidies for vulnerable consumers.
• Transparent Debt Management: Rigorous audits and credible verification of outstanding claims.
• Disco Reforms: Enforce performance benchmarks, recapitalisation, technical upgrades, and explore concessions where needed.
• TCN Overhaul: Consider alternative management models to boost efficiency and attract investment.
• Support Decentralisation & Renewables: Encourage state initiatives, IPPs, and off-grid solutions.
• Time-Bound Interventions: Link government support to measurable milestones to limit fiscal exposure.

Yusuf concluded: “Power sector reform is critical to Nigeria’s economic competitiveness, industrial growth, and social welfare. But it is a long-term, incremental process requiring decisive action on structural inefficiencies, governance, and fiscal discipline.”

The brief comes as average supply hovers around 4,500–5,000 MW for 220 million people, leaving industries reliant on costly alternatives.