Nigeria: Electricity tariff hike may increase cost of doing business – Rewane

Managing Director of Financial Derivatives Company (FDC) Limited, Bismarck Rewane, has said that any electricity tariff hike will have dire consequence for businesses and consumers.

“However, while a possible tariff increase may provide short-term financial relief for the government, it does little to address Nigeria’s persistent energy crisis. Instead, they come at a steep cost for businesses and consumers already grappling with inflation and weak purchasing power,” said Rewane.

He said SMEs—the backbone of the economy—will face rising operational costs.

‘Worse, the power supply remains grossly inadequate, forcing industries to rely on expensive alternatives like diesel and gas. Without a substantial expansion in energy generation, tariffs merely shift financial pressure onto consumers and businesses rather than addressing Nigeria’s fundamental power shortages’, he said.

Nigeria’s power crisis is more than an inconvenience—it’s an economic emergency. 14 national grid collapses in 13 months since February 2024, and daily electricity generation remains stuck around 4,000 MW for a population of over 200 million people.

This is despite an installed capacity of 13,000 MW. The energy shortfall remains a major impediment to economic growth as industries continue to operate far below capacity.

He lamented that has become the case in spite of the fact that Nigeria sits on 2.75 billion metric tonnes of untapped coal reserves, a resource that could generate up to 53,900 MW if fully harnessed.

‘While global energy trends favour renewables, leading economies like China still rely on coal for over 60 per cent of their electricity, using advanced, cleaner technologies to drive industrialization and energy security.

“By adopting modern, cleaner coal technologies, Nigeria has a viable path to power its industries, create jobs, and drive economic transformation,” he opined.

The Nigerian government is considering a 66 per cent increase in electricity tariffs to N193.63/kWh from N116.18/kWh, aiming for cost-reflective pricing to ease liquidity challenges in the power sector.

He said that if implemented, this will be the second tariff hike since the last hike of 230 per cent for Band A users in April 2024.

Before this, subsidies have kept electricity costs artificially low leading to mounting fiscal constraints.