An Abuja-based policy think tank, Agora Policy, said Nigeria needs to embark on a comprehensive reset rather than getting fixated on tariff adjustments alone.
The policy think-tank, in its maiden report released on Monday, said this would require the government to treat the sector as distressed infrastructure requiring recapitalisation, ownership restructuring, contract enforcement, and industrial demand recovery, rather than as a tariff problem to be solved by gradually passing higher costs to consumers.
“A credible rescue of Nigeria’s power sector has to begin from a simple premise: adjusting tariffs is necessary, but they are not sufficient. The current reform trajectory has been built largely around targeted tariff increases for higher-consuming customers, especially Band A users, combined with periodic debt refinancing,” the report said.
The think tank said a higher-tariff model improves the revenue model only where electricity is actually supplied, metered, billed, collected, and remitted, noting that where those conditions do not exist, tariff increases may reduce fiscal subsidies at the margin but will not automatically create a functioning electricity market.
It said the priority should be a decisive restructuring of the distribution companies (DisCos), adding that distribution remains the commercial heart of the value chain.
“Nigeria should move beyond the fiction that all eleven DisCos can be repaired through tariff adjustments alone. The Federal Government of Nigeria via the Ministry of Power and Nigerian Electricity Regulatory Commission (NERC) should conduct a detailed technical and commercial assessment of electricity distribution to classify DisCos into three groups,” it said.
Agora policy said Nigerian Bulk Electricity Trading (NBET) was created as a transitional credit bridge because DisCos were not creditworthy enough to support bankable PPAs directly, but its continued centrality has allowed market failure to accumulate as claims against the federal balance sheet.
The report said Nigeria should therefore stop NBET from entering new Power Purchase Agreements (PPAs), audit and classify all NBET-related receivables, securitise only verified obligations, cap or renegotiate disputed claims, and gradually novate existing contracts to creditworthy DisCos, eligible industrial customers, licensed traders, embedded generators, and state electricity markets.
“NBET should remain only as a residual stabilisation vehicle for legacy obligations and non-creditworthy segments, with a clear sunset path and a declining contract book.”
It said the transition must be disciplined because direct contracting with weak counterparties would simply move the NBET problem elsewhere.
“No DisCo or state market entity should inherit NBET contracts unless it provides credible payment security through escrow accounts, letters of credit, revenue locks, guarantees, or other enforceable mechanisms.
“The transition away from NBET should also be used to create a direct contracting market in which generation companies (GenCos), embedded generators, state-backed suppliers, and licensed traders can sell power to industrial customers, while DisCos and transmission operators earn transparent wheeling charges for the use of their networks,” the report said.
The report added that Nigeria needs a credible gas-to-power industrialisation strategy because no country can build a competitive manufacturing economy if electricity generation remains dependent on gas supplied through high-risk private contracts that are inherently expensive.
The think tank said delivering low-cost gas for power should be treated as part of Nigeria’s industrial policy rather than merely as a private commodity sale.
“The federal government should create a Gas-to-Power Infrastructure and Industrialisation Fund to finance the delivery of pipelines, processing plants, compression stations, storage, metering, and last-mile gas connections to power plants and industrial corridors,” the report said.
It said the objective should be to reduce the delivered cost of gas by lowering infrastructure financing costs and payment-risk premiums, as against the current approach of setting tariffs for gas producers.
“This fund should be paired with a commercially-run, government-owned gas infrastructure company that operates on open-access principles, enters long-term gas supply and transportation contracts, and sells gas or gas-transport capacity to GenCos, embedded generators, state electricity markets, and industrial corridors under enforceable payment arrangements.
“The company should be publicly-owned but commercially-governed, with independent audits, regulated tariffs, project-level accounts, and a prohibition against accumulating hidden arrears,” it added.
Agora policy said that where the government chooses to subsidise gas for public-grid supply or industrialisation, the subsidy should be explicit and budgeted; it should not be hidden through unpaid invoices to gas suppliers.
According to the report, Nigeria cannot build a financially viable grid while large industrial and commercial users remain outside it.
The report said many large firms invested in gas-fired captive plants because the grid could not provide a reliable supply, and those assets should not be stranded or treated simply as evidence of market defection.
“Nigeria can use industrial captive power not as a competitor to the grid, but as a bridge toward a more decentralised, reliable, and liquid electricity market. The goal would be to make grid-connected or grid-integrated power demonstrably cheaper and more reliable than self-generation — and in doing so, bring high-volume, creditworthy demand back into the formal electricity market.
“A public gas-to-power backbone would allow Nigeria to support low-cost industrial electricity while avoiding another NBET-style accumulation of unpaid obligations. It would also help recapture industrial load by making grid-connected or grid-integrated gas-fired power cheaper and more reliable than isolated self-generation,” it said.
The report said Nigeria needs to coordinate decentralisation rather than allow it to become balkanisation.
“Nigeria should use decentralisation to build state electricity markets around local demand while creating a federal-state coordination compact covering technical standards, tariff principles, wheeling rules, grid access, consumer protection, cross-border transactions, and dispute resolution.
“This matters because state electricity markets can help Lagos, Ogun, Rivers, and other industrial states move faster, but without coordination they could also fragment the national market and leave weaker states stranded with poorer customers and weaker infrastructure,” the report said.
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The think tank said Nigeria should create a time-bound federal electricity recovery vehicle for distressed territories, operated on commercial principles and with a clear viability timeline.
“Nigeria needs to prioritise metering and customer enumeration as part of public infrastructure, not as a narrow DisCo procurement matter. Without customer enumeration, feeder mapping, transformer metering, and end-user metering, Nigeria cannot know where losses occur, which feeders are viable, where subsidies are needed, which customers can pay, and which territories can attract private capital,” it said.
The report said rethinking the sector should not mean forcing all demand back onto the national grid.
“Nigeria’s electricity deficit is too large, and the grid is presently too fragile, for a single-supply model. A credible reform strategy should diversify supply sources while preserving the financial viability of shared networks.
“Nigeria should take distributed solar and mini-grids seriously as part of the supply mix but should also avoid creating a new form of untracked load defection.
“Distributed energy should be integrated through the use of net-billing rules, transparent grid-service charges, concessional consumer finance and planning frameworks that ensure customers who benefit from shared networks contribute fairly to their costs,” it said.
