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Nigeria's Electricity Tariffs And Costs: A 2025 Breakdown Per Kilowatt-Hour
In recent years, Nigeria's electricity sector has undergone significant transformations, particularly concerning tariff structures and costs. As of 2025, understanding these changes is crucial for consumers, policymakers, and stakeholders. This comprehensive guide delves into the current electricity tariffs, the factors influencing these rates, and addresses frequently asked questions to provide a clear picture of Nigeria's electricity landscape.
Overview of Nigeria's Electricity Tariff Structure
Nigeria's electricity tariff system is designed to reflect the cost of generating, transmitting, and distributing power. The Nigerian Electricity Regulatory Commission (NERC) oversees and regulates these tariffs, ensuring they align with the nation's energy policies and economic realities.
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Service-Based Tariff (SBT) System
Introduced in November 2020, the Service-Based Tariff (SBT) system classifies consumers into bands based on their average daily electricity supply:
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Band A: Minimum of 20 hours of supply per day
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Band B: Minimum of 16 hours
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Band C: Minimum of 12 hours
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Band D: Minimum of 8 hours
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Band E: Minimum of 4 hours
This classification ensures that consumers are billed in proportion to the quality and consistency of electricity they receive.
Significant Tariff Adjustments in 2024
In April 2024, NERC approved a substantial increase in electricity tariffs, raising the rate from ₦68 per kilowatt-hour (kWh) to ₦225/kWh for urban consumers in Band A. This 230% hike aimed to reduce the financial burden of subsidies on the government and promote a more sustainable energy sector. Notably, this adjustment affected approximately 15% of electricity customers, who consume about 40% of the nation's electricity.
Rationale Behind the Tariff Increase
Several factors contributed to this tariff hike:
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Subsidy Reduction: The government had been spending trillions of naira annually on electricity subsidies, which was deemed unsustainable. By increasing tariffs, the aim was to alleviate this financial strain.
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Cost-Reflective Pricing: Aligning tariffs with the actual costs of electricity generation and distribution encourages investment and efficiency within the sector.
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Foreign Exchange and Inflation: Fluctuations in the exchange rate and rising inflation impacted the costs associated with power generation, necessitating tariff adjustments.
Electricity Subsidies in 2025
Despite tariff hikes, the government continues to provide subsidies, particularly for low-income consumers. In 2025, approximately ₦2.36 trillion is allocated for electricity subsidies. In January 2025 alone, ₦178.03 billion was spent on subsidies, a slight decrease from December 2024's ₦197.91 billion.
Distribution of Subsidies Among DisCos
The subsidy distribution among various Electricity Distribution Companies (DisCos) in January 2025 was as follows:
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Abuja Disco: ₦28.38 billion
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Ikeja Disco: ₦27.2 billion
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Eko Disco: ₦22.88 billion
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Ibadan Disco: ₦24.03 billion
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Port Harcourt Disco: ₦14.59 billion
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Kaduna Disco: ₦14.13 billion
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Enugu Disco: ₦15.38 billion
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Benin Disco: ₦15.75 billion
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Jos Disco: ₦11.84 billion
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Yobe Disco: ₦7.77 billion
These subsidies aim to cushion the impact of tariff increases on consumers, ensuring affordability while the sector transitions to cost-reflective pricing.
Factors Influencing Electricity Tariffs
Several key factors influence electricity tariffs in Nigeria:
1. Cost of Gas
Natural gas is a primary fuel for power generation in Nigeria. Changes in gas prices directly affect electricity production costs, subsequently influencing tariffs.
2. Exchange Rate
The value of the naira against major currencies impacts the cost of imported equipment and services essential for power generation and distribution. Exchange rate fluctuations can lead to adjustments in tariffs to cover these costs.
3. Inflation
Rising inflation increases operational costs for power companies, which may be passed on to consumers through higher tariffs.
4. Infrastructure and Operational Efficiency
Investments in infrastructure and improvements in operational efficiency can reduce losses and operational costs, potentially stabilizing or lowering tariffs over time.
Implications for Consumers
The tariff adjustments and subsidy allocations have several implications for consumers:
1. Financial Impact
Consumers in Band A experienced a significant increase in their electricity bills due to the tariff hike. However, subsidies for other bands help mitigate the financial burden on lower-income households.
2. Service Quality
The SBT system ensures that higher tariffs correspond with better service quality. Consumers paying more are expected to receive more reliable and extended electricity supply.
3. Energy Efficiency
Higher tariffs may encourage consumers to adopt energy-efficient practices and appliances, reducing overall consumption and costs.
Future Outlook
The Nigerian government aims to transition to a fully cost-reflective tariff system by 2027, phasing out subsidies while implementing social tariffs to protect vulnerable populations.
