By The Federal Government is planning to move away from indefinitely funding electricity tariff shortfalls and adopt bilateral power agreements as it seeks to address mounting subsidy obligations, revenue losses and persistent gas supply challenges.
Minister of Power, Joseph Tegbe, disclosed this at the Harvard Business School Association of Nigeria (HBSAN) Energy Conference on Friday, October 9, saying the government could no longer continue covering the gap between electricity tariffs paid by consumers and the actual cost of supplying power.
“We can’t keep covering tariff shortfalls until we give power to every Nigerian. So, what we need to do is move to bilateral agreements,” Tegbe said.
The proposed arrangement is expected to link electricity supply more directly to payment, although the government has yet to provide details on how the model will operate or affect consumers.
The plan comes amid rising electricity subsidy obligations. According to the Nigerian Electricity Regulatory Commission’s 2024 annual report, the Federal Government’s gross electricity tariff subsidy obligation reached approximately ₦1.95 trillion in 2024.
The subsidy covers the difference between the cost of supplying electricity and the tariffs paid by consumers, leaving the government responsible for the shortfall.
In April 2024, the government increased tariffs for Band A customers, who were expected to receive a minimum average of 20 hours of electricity daily. Customers in Bands B to E were excluded from that adjustment.
Tegbe also raised concerns about companies allegedly obtaining electricity directly from the national grid outside authorised arrangements. He said some companies were consuming as much as 150 megawatts of electricity, adding that the government intended to take action.
The minister, however, did not identify the companies or clarify whether the figure represented their combined consumption.
The proposed reform also depends on resolving persistent gas supply challenges affecting power generation. Nigeria relies heavily on gas-fired plants, but inadequate gas supplies and outstanding payments have continued to constrain electricity production.
At the conference, the Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, Rabiu Abdullahi Umar, said the country needed to focus on implementing existing gas-sector reforms.
He said authorities were working on arrangements to redirect available gas supplies to locations where they were needed when an obligated supplier could not deliver.
The government has also been working to settle longstanding debts owed to electricity generation companies. In April 2026, the Presidency announced a ₦3.3 trillion settlement framework to address verified legacy debts accumulated between February 2015 and March 2025.
The proposed shift towards bilateral agreements signals an effort to prevent fresh debts from accumulating. However, questions remain about how the government will protect consumers from unaffordable tariffs while ensuring electricity companies receive enough revenue to sustain supply.
