How Non-Cost-Reflective Electricity Tariffs Hurt Consumers and DisCos

Nigeria’s electricity tariffs often do not cover the full cost of generating, transmitting and distributing power. This creates a funding gap for electricity distribution companies, with serious consequences for consumers and the power sector. The argument is that capped tariffs can encourage estimated billing, delay the rollout of prepaid meters and deepen reliance on government subsidies. Communities may also be forced to fund repairs to transformers, cables and poles, while some customers face demands for unofficial payments to resolve faults or reconnections. DisCos also struggle to attract investment when their revenues cannot cover operating costs. This can leave networks poorly maintained, increase technical and commercial losses, and contribute to power rejection even when generation is available. A better tariff structure, alongside strong consumer protection and regulatory oversight, could improve metering, service delivery and accountability.

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