A Broken Grid and a Nation Held Back
Let’s face it: Nigeria’s electricity crisis isn’t new. It’s one of those national issues that has refused to go away, like poor roads and fuel queues. But unlike other sectors, the failure of the electricity system has a ripple effect on almost every part of daily life—households, businesses, education, and even healthcare. Ask any small business owner in Nigeria, and chances are they spend more on fueling a generator than they do on rent. From Lagos to Lokoja, generators hum louder than voices. It’s exhausting and expensive.
Now here’s the hard truth: Nigeria is the largest economy in Africa but has one of the lowest electricity access rates per capita. Only around 55% of Nigerians are connected to the national grid, and even those connected face frequent blackouts. According to grid performance data, Nigeria generates an average of 4,000–5,000 megawatts (MW) for a population exceeding 200 million. That’s less than what some small European countries produce for populations ten times smaller.
This chronic electricity shortage hasn’t just slowed down industrialization; it’s actively damaging it. It has made us reliant on diesel and petrol generators—dirty, expensive, and loud. Businesses that should be expanding are instead calculating how to survive their next power bill. Manufacturing plants relocate to other countries. Tech hubs rely on inverters. And average citizens have turned “Up NEPA!” into a national chant—a sarcastic celebration of restored electricity in the year 2025. That’s how low the bar has fallen.
Against this dismal backdrop, a new wave of power reforms is being introduced. And for the first time in a long while, these changes aren’t just cosmetic. They cut deep—starting from Nigeria’s constitution down to your local distribution company. But will it be enough to truly reshape a sector that has been broken for decades? Let’s break it down section by section, fact by fact.
Background: The Electricity Sector Before Reforms
Before the recent wave of power reforms, Nigeria’s electricity sector was rigidly centralized. The Federal Government, through the National Electricity Regulatory Commission (NERC) and various public institutions like the Transmission Company of Nigeria (TCN), controlled almost every layer of the value chain—generation, transmission, and distribution.
In 2005, the Electric Power Sector Reform Act (EPSRA) set the stage for private sector involvement by unbundling the Power Holding Company of Nigeria (PHCN). This led to the creation of 11 distribution companies (DisCos), 6 generation companies (GenCos), and one transmission company. The goal was to improve efficiency, reduce government burden, and attract investment.
But by 2013, when the privatization was implemented, reality kicked in. The DisCos inherited massive infrastructure deficits, outdated equipment, and low customer trust. Most couldn’t raise the capital needed to overhaul dilapidated networks. Tariffs were low, payment default was high, and many Nigerians were still being billed based on estimations because prepaid meters were unavailable or delayed. Generation companies struggled too—often unable to recover costs due to poor transmission infrastructure and liquidity issues in the market.
Transmission, meanwhile, remained wholly government-owned under TCN. The result? An unstable sector where DisCos blamed GenCos, GenCos blamed TCN, and everyone blamed the government. The regulatory framework lacked bite, and long-term planning gave way to crisis management. Reforms before 2023 were piecemeal at best. The system was neither efficient nor transparent. And certainly, neither inclusive nor sustainable. That’s the environment the current reforms are trying to change.
The Big Shift: Constitutional Changes and State-Level Electricity Laws
One of the most historic moves in Nigeria’s electricity story came in March 2023, when President Muhammadu Buhari signed a constitutional amendment that removed electricity from the Exclusive Legislative List and placed it on the Concurrent List. In simpler terms, this means that states are now legally empowered to generate, transmit, and distribute electricity independent of the federal government.
Before this amendment, states were completely reliant on the federal grid and NERC. Even states with access to gas, sunshine, hydro, or wind couldn’t build their own independent systems unless they went through the cumbersome federal approval process. Now, with the legal shackles broken, the states are taking the lead. Lagos, Ekiti, and Edo states have already passed or are drafting their own electricity market laws. Lagos Electricity Market Bill, for instance, seeks to establish a sub-national grid and regulate it independently through a Lagos State Electricity Regulatory Commission.
This reform is a game-changer. It opens the door for localized innovation, rural electrification schemes, off-grid solar programs, and private sector partnerships tailored to state-specific realities. States like Gombe or Sokoto, with abundant sunlight, can now develop solar farms without waiting on Abuja. Rivers and Bayelsa can maximize their gas reserves for power. And more importantly, power delivery becomes politically accountable at a closer level—governors can no longer pass the blame to the federal government when things go dark.
Of course, this decentralization is not without risk. States will now need technical competence, regulatory agencies, legal frameworks, and infrastructure planning to succeed. But it marks a decisive break from the old model of top-down mismanagement. If done right, this could be the beginning of a more competitive and functional electricity market where Nigerians can finally have a say—and a stake—in their power destinies.
Tariff Reform: New Banding System and Cost-Reflective Pricing
One of the most controversial but necessary reforms currently shaping Nigeria’s electricity sector is the shift toward cost-reflective tariffs. The federal government, under the Multi-Year Tariff Order (MYTO), has implemented a service-based tariff structure where customers are grouped into bands—A to E—based on the number of daily hours of power supply they receive. Band A customers are promised 20 hours or more of electricity per day, while Band E receives less than four hours daily.
The rationale is simple: you pay more if you get more power. As of April 2024, Band A customers began paying N225 per kilowatt-hour (kWh), up from N68/kWh—a staggering 230% hike. This sparked immediate outrage among residents and businesses in Band A neighborhoods, especially in urban areas like Lagos, Abuja, and Port Harcourt. But for the government and industry players, the hike was overdue.
The truth is Nigeria has been operating on artificially low tariffs for decades. DisCos couldn’t recover costs, which meant they didn’t invest in infrastructure or service improvements. GenCos weren’t being paid on time. And the government kept filling the funding gap through subsidies—spending over N2 trillion in the past ten years alone. The sector was bleeding money and limping under its own weight.
Cost-reflective tariffs are intended to force discipline into the system. With accurate pricing, investors can come in. Operators can plan and deliver. Customers, theoretically, will pay for actual value. But here’s the catch: the success of this reform depends entirely on service delivery. Nigerians will not pay more for the same unreliable supply. That’s where regulation, monitoring, and accountability come in. And that’s where many people remain skeptical.
For now, only 15% of customers—those in Band A—are affected by the full tariff hike. But the writing is on the wall: over time, all bands will shift toward cost-reflective pricing. It’s not just a question of fairness. It’s a matter of financial survival for the sector. The journey will be painful, but the alternative—total collapse—is worse.
Metering Push: Tackling Energy Theft and Estimated Billing
Nigeria’s metering gap remains one of the sector’s biggest challenges. Despite efforts over the years, millions of households and businesses are still subjected to estimated billing—an unfair and opaque practice where DisCos charge customers based on guesswork rather than actual electricity consumption. This not only leads to customer dissatisfaction but also fuels widespread electricity theft, disputes, and revenue losses for the power companies.
To address this, the federal government launched the National Mass Metering Programme (NMMP) in 2020, aiming to distribute millions of free prepaid meters to Nigerian homes. As of early 2025, over 1.2 million meters have been installed, but the gap remains wide. The total metering deficit is still estimated to be above 6 million units. The pace of deployment is also uneven across DisCos, with some showing more progress than others.
The logic is simple: when people are metered, they pay more willingly because they can monitor their usage. It empowers consumers, eliminates estimated billing, and improves cash flow for DisCos. It also reduces opportunities for corrupt practices like “billing adjustments” or illegal bypasses.
In the latest policy push, NERC has directed DisCos to meter all Band A customers immediately or risk removal from the premium tariff structure. Some DisCos have introduced vendor financing schemes where customers can buy meters and get reimbursed over time through token deductions. Others are leveraging mobile apps to allow real-time monitoring and digital recharge, especially in urban centers.
But the success of this reform isn’t just about rolling out devices. Metering must be accurate, tamper-proof, and tied into a robust data system. And consumers must be educated on usage management to avoid shockingly high bills. Ultimately, closing the metering gap is about building trust in a broken system—and that takes more than hardware. It takes transparency, responsiveness, and a shift in mindset from both operators and the public.
Renewable Energy and Decentralized Solutions
With over 90 million people still off-grid and climate resilience rising on the global agenda, Nigeria cannot rely solely on the national grid to meet its power needs. That’s why one of the boldest fronts in the current wave of power reforms is the push toward renewable energy and decentralized solutions—solar mini-grids, standalone home systems, and hybrid microplants tailored for rural and peri-urban communities.
The government’s Energy Transition Plan targets 30 GW of electricity by 2030, with at least 30% of that from renewables. The Rural Electrification Agency (REA) has already deployed hundreds of solar mini-grids and stand-alone systems across underserved communities. These systems bypass the dysfunctional national grid and offer cleaner, cheaper, and more reliable power directly to homes, clinics, and schools.
Private companies like Lumos, Daystar Power, and Husk Power are scaling solar-as-a-service models where customers pay monthly fees for access to clean energy. These companies often bundle solar panels, batteries, and inverters into one package and provide after-sales support—making them more attractive than unreliable DisCos.
In places like Jigawa, Katsina, and parts of Niger State, entire villages now run on mini-grids. In Lagos and Abuja, businesses are installing rooftop solar to escape the pain of fuel costs and generator noise. Even banks, hospitals, and telcos are shifting to hybrid systems that combine solar, battery, and diesel backup.
But scaling renewables still faces barriers—high upfront costs, limited financing, regulatory uncertainties, and lack of local manufacturing capacity for components. That’s where the Central Bank’s intervention funds and international grants come in. With the right incentives, Nigeria could become a renewable energy leader in Sub-Saharan Africa. The sun shines year-round here. The wind blows. Rivers flow. Nature has done its part. The question is: can policy catch up fast enough?
Strengthening Transmission: SCADA and Unbundling of TCN
Even if generation improves, power can’t get to customers without a reliable transmission backbone. This is the role of the Transmission Company of Nigeria (TCN), a federally owned entity that transports electricity from generation stations to distribution companies. Unfortunately, TCN has long been a bottleneck in the power value chain—beset by outdated infrastructure, bureaucratic delays, and poor coordination.
One of the most critical reforms underway is the planned unbundling of TCN into separate entities for transmission service operations and system control. This separation aims to improve efficiency, transparency, and accountability in grid management. The current structure of TCN makes it both the operator and the referee, leading to inefficiencies and conflicts of interest. By separating system operations from asset ownership and maintenance, the new model aligns with global best practices.
Another major development is the rollout of a modern Supervisory Control and Data Acquisition (SCADA) system. SCADA allows real-time monitoring, fault detection, and remote control of transmission assets. Nigeria’s existing SCADA infrastructure is fragmented, limited in coverage, and often obsolete. With the new upgrade, grid operators will be able to predict failures, balance loads more effectively, and prevent national blackouts caused by cascading faults.
In 2023, the federal government secured funding from multilateral agencies to expand transmission lines, install smart relays, and digitize substation controls. Projects are ongoing in Benin, Ikeja West, Jos, and Shiroro, among others. The goal is to expand grid capacity from the current 7,000 MW to over 10,000 MW within the next few years.
Still, transmission remains a weak link. Projects are often delayed due to right-of-way issues, land disputes, and contractor inefficiencies. And unless state-level generation and distribution reforms are matched by federal transmission improvements, the entire system will remain imbalanced. Think of it as fixing the taps and water sources, but ignoring the pipes in between. It just won’t flow.
Private Sector Involvement and Investment Incentives
No meaningful power reform can succeed without private capital. The Nigerian government has finally begun accepting this reality—not just in word but in policy. Over the past 24 months, multiple initiatives have been rolled out to woo investors into every layer of the electricity value chain: generation, distribution, metering, renewables, and embedded systems.
Tax holidays, import duty waivers for solar components, performance-based financing, and access to foreign exchange for power-sector projects are all part of the new incentive toolkit. Under the Nigerian Electricity Act 2023, Independent System Operators (ISOs) and Private Network Operators can now legally participate in transmission and distribution outside the traditional government pipeline. This is a dramatic shift. It effectively ends the monopoly of DisCos in their zones, opening the door for competition and efficiency.
Multilateral partners are also stepping up. The World Bank, African Development Bank, and USAID’s Power Africa initiative have committed billions of naira in funding, technical support, and risk guarantees. Nigeria’s Energy Transition Plan has a target of $23 billion in investment by 2030, most of which is expected to come from private capital. And recent efforts by the Nigerian Sovereign Investment Authority (NSIA) to co-invest in mini-grids and utility-scale solar farms show that local capital is now taking the sector seriously.
But investors are still cautious. The history of regulatory flip-flops, poor enforcement, and legal disputes hangs heavy. Companies want policy consistency, a clear dispute resolution process, and credible off-takers who can pay. The key challenge going forward will be to maintain regulatory discipline and demonstrate that the new rules of the game will stick. Without that, the money will remain on the sidelines—and the lights, off.
Local Content and Job Creation in the New Electricity Ecosystem
One often overlooked but vital angle of Nigeria’s power reforms is the potential for job creation through local content development. The growth of solar manufacturing, smart meter assembly, transformer repairs, and electrical engineering services can become a major employment engine if properly structured.
Under the Nigerian Electricity Act 2023 and related local content regulations, power companies are required to source equipment and skills locally where possible. The Renewable Energy Association of Nigeria (REAN) has advocated for the expansion of domestic solar panel assembly plants in Lagos, Ogun, and Kano. Some firms already operate small-scale facilities, providing jobs to technicians, engineers, and logistics providers.
The new state-level electricity laws also open up job opportunities for electricians, meter installers, energy auditors, and maintenance experts who understand local networks. Universities and polytechnics are gradually responding by offering specialized courses in renewable energy technologies, power systems engineering, and energy finance. With Nigeria’s massive youth population and rising tech talent, there’s an opportunity to build a power sector that’s not just efficient, but homegrown.
To unlock this potential, targeted policies are needed—vocational training programs, grants for indigenous innovators, and subsidies for local manufacturers. Nigeria cannot afford to simply replace dependency on diesel with dependency on imported solar panels. Real reform means building an ecosystem that can sustain itself, employ its people, and innovate for the future.
Governance, Accountability, and Sector Monitoring
The success of any reform ultimately depends on governance. Without credible institutions, even the best-designed electricity market will fail. That’s why NERC, the sector regulator, is being pushed to do more than issue licenses. It must enforce service delivery standards, penalize infractions, resolve customer disputes promptly, and ensure transparency in the entire value chain.
For the first time, real-time data from DisCos, GenCos, and TCN are being made public through the Nigeria Electricity System Operator’s dashboards. These platforms show grid capacity, generation output, outages, and frequency of blackouts by region. This level of transparency was unthinkable five years ago. It helps journalists, researchers, and the public hold the system to account.
Additionally, the Federal Ministry of Power now publishes quarterly performance reports. New whistleblower policies are in place to expose fraud and manipulation in the sector. And citizen feedback platforms—like the NERC Customer Complaints portal—are beginning to get more attention. Governance is improving, but slowly. Enforcement still needs more teeth. And government interference in tariff decisions or board appointments remains a threat to regulatory independence.
Still, if the current reforms continue on this path, the electricity sector could become a case study in how governance can turn dysfunction around. The playbook is simple but hard: clear rules, enforced fairly, with data to back decisions—and people empowered to demand results.
The Road Ahead for Power Reforms in Nigeria
Nigeria’s electricity sector has been broken for decades. But for the first time in a long time, the signs of real, foundational change are visible. From the constitutional restructuring that empowers states, to tariff reforms that prioritize financial sustainability, to the rise of solar mini-grids and smart metering—what we’re seeing now isn’t just patchwork. It’s a system overhaul.
Of course, none of these reforms are easy. Tariff hikes are painful, especially in a country where inflation bites hard and incomes are stretched thin. State-level electricity markets require political will, technical capacity, and trust that can’t be built overnight. Renewable energy needs financing, supply chains, and regulatory clarity. And governance? That’s a never-ending battle of institutions versus interference.
But here’s what matters: Nigerians are no longer waiting passively. Communities are building their own mini-grids. States are writing their own power laws. Businesses are installing their own solar systems. And even in the face of rising costs, people are demanding value for money, not just promises.
The reforms underway today won’t fix everything tomorrow. But they’ve started to shift the question from *if* power can work in Nigeria to *how* we can make it work better, faster, and more equitably. And that shift—grounded in law, policy, and practice—is the most powerful current running through Nigeria’s electricity future today.
It’s a long road ahead, but finally, it feels like we’re moving in the right direction.
