WORLD BANK SUPPORTS NIGERIA’S PUSH TO RESHAPE ELECTRICITY TARIFFS AND SUBSIDIES

The World Bank Group has expressed its readiness to support Nigeria’s ongoing efforts to reform electricity tariffs and subsidy arrangements as the country seeks to address persistent financial challenges within the power sector and create a more sustainable electricity market.

The commitment was contained in the World Bank’s Country Partnership Framework for Nigeria covering the 2026 to 2032 financial years. The framework outlines areas where the development institution intends to support Nigeria, including improvements in electricity access, reliability, regulation and investment across both grid-connected and off-grid power systems.

According to the World Bank, reforming the tariff and subsidy structure is necessary to restore the financial health of Nigeria’s electricity industry. The institution said its support would focus on tariff and subsidy frameworks, competitive investment planning and effective regulation, while also creating conditions capable of attracting greater private-sector participation.

The bank noted that Nigeria continues to face one of the world's largest electricity access deficits, with more than 86 million people reportedly without access to electricity. It also highlighted the effect of unreliable power supply on households and businesses, noting that frequent outages have forced many consumers and companies to depend on costly alternative sources such as petrol and diesel generators.

The World Bank further identified the sector’s financial difficulties as a major obstacle to improving electricity services. It estimated that tariff shortfalls had reached about $2.45 billion by the end of 2025, reflecting the gap between what electricity costs to provide and the revenue generated through existing tariffs.

The institution said its proposed support would go beyond tariff reform by helping to mobilise private investment for renewable energy projects and improvements to electricity networks. It said such investments would contribute to expanding access, strengthening the resilience of the power system and ensuring that affordability remains part of the reform process.

One of the major areas of intervention will be the expansion of distributed renewable energy. The World Bank said it would continue supporting the Nigeria Distributed Access through Renewable Energy Scale-up platform, which is designed to attract private capital into mini-grid projects and standalone solar systems.

The bank also plans to assist the Federal Government in developing stronger public-private partnership arrangements and investment frameworks covering electricity generation, transmission and distribution. This assistance is expected to include preparing projects, structuring transactions and establishing transparent competitive processes through which private investors can participate in the sector.

Under the six-year partnership framework, the World Bank projected that its combined on-grid and off-grid interventions could provide electricity access to more than 32 million Nigerians. The initiative is aligned with Nigeria’s broader Mission 300 commitments aimed at significantly expanding electricity access across the country.

The proposed reforms come against the background of years of challenges surrounding electricity pricing and government subsidies. The World Bank noted that the Federal Government had historically kept electricity tariffs below the actual cost of supplying power, leaving a substantial difference between the amount consumers paid and the cost incurred by electricity providers.

The inability to consistently settle those tariff shortfalls has contributed to liquidity problems across the electricity value chain. Generating companies, distribution companies and other operators have faced financial pressures that have affected their ability to invest adequately in infrastructure and improve service delivery.

The Federal Government is therefore under pressure to balance two competing objectives: ensuring that electricity companies become financially sustainable while preventing electricity prices from becoming unaffordable for households and businesses. The World Bank said its approach would seek to combine financial sustainability with expanded access and affordability.

Power Minister Joseph Tegbe has also indicated that the government expects to address the liquidity challenges confronting the sector in 2027. His position comes as authorities continue to implement measures aimed at restructuring the electricity market and reducing the financial burden associated with persistent tariff shortfalls.

The World Bank’s support is expected to provide both technical and financial backing for these efforts. However, the success of the reforms will ultimately depend on how effectively the government, regulators, electricity operators and private investors implement the proposed changes.

For millions of Nigerians still dealing with unreliable electricity supply, the central expectation is that reforms will eventually translate into more dependable power. At the same time, businesses and investors are looking for a power market capable of generating sufficient revenue to support maintenance, infrastructure upgrades and long-term investment.

With tariff and subsidy reforms now forming part of the World Bank’s six-year partnership with Nigeria, the coming years are expected to be critical for determining whether the country can resolve the sector’s longstanding financial problems while expanding reliable and affordable electricity access.