Targeted subsidy approach’ll address power sector challenges

Omeiza Bilal

The Managing Director, Mainstream Energy Solutions Limited, Engr. Lamu Audu has said the challenges of the power sector can only be solved through a targeted subsidy approach.

Engr. Lamu, who said this at the 5th edition of the Power Correspondents Association of Nigeria (PCAN) Annual Conference Thursday in Abuja, added that the approach is better than blanket subsidies that distort market signals and sustain inefficiency.

Speaking on the theme “Cost Reflective Tariff vs. Energy Poverty: Finding a Pricing Balance in the Nigerian Power Sector”, the Mainstream Energy MD, who was represented by the NISO’s Managing Director and Chief Executive Officer, Engr. Abdu Bello Mohammed, noted that to strike a balance in the country’s energy sector, there is a need to strike a balance between cost reflective tariff and energy poverty.

Lamu noted that several tariff reviews over the years have failed to address the sectors’ challenges as it continues to face persistent liquidity shortfalls, under-recovery by the Distribution Companies and inadequate investment in infrastructure, and weak supply reliability that often undermines consumers’ willingness to pay.

According to him, properly designed lifeline tariffs and data-driven welfare-linked rebates can provide real protection for low-income consumers while allowing the market to function efficiently.

“Second, we must confront inefficiency head-on. Reducing technical, commercial, and collection losses is one of the fastest ways to relieve pressure on tariffs. Every percentage point of loss recovered translates directly to lower costs for consumers. This requires renewed focus on metering, automation, data accuracy, and operational discipline across all segments of the industry.

“Third, transparency must be non-negotiable. The Nigerian Independent System Operator, in its current structure, plays a central role in ensuring that energy is dispatched efficiently, market settlements are transparent, and imbalances are minimized. By improving transparency and operational efficiency, we strengthen investor confidence and ensure that tariff adjustments are grounded on verifiable performance data.

“Furthermore, as the new Electricity Act empowers states to establish subnational electricity markets, we must embrace embedded and decentralized energy solutions. Encouraging micro-grids, off-grid systems, and embedded generation can reduce transmission losses, improve reliability, and lower the average cost of supply for consumers,” Engr. Lamu said.

To strike a balance, Lamu, who is also on the board of the Nigeria Electricity Systems Operator (NISO) stressed that transitioning to a fully cost-reflective tariff must be gradual, deliberate, and linked to visible service improvement.

According to him, consumers are more willing to pay when they experience reliability and fairness.

“Service-based tariffs, coupled with transparent communication and performance-linked adjustments, will foster this trust.

“Regulatory predictability is also crucial. Investors, operators, and consumers need certainty. A stable, transparent, and consultative tariff review process by the Nigerian Electricity Regulatory Commission builds confidence and reduces the temptation for political interference.

We believe that tariff reform and market efficiency are two sides of the same coin. A transparent, data-driven market reduces systemic inefficiencies, narrows the revenue gap, and supports the case for realistic, socially sensitive tariffs.

However, achieving the right pricing balance also depends on broader policy alignment. Nigeria must continue to pursue gas pricing reform to lower the cost of generation. We must strengthen data governance to improve forecasting and tariff modeling.

Investments in energy efficiency and demand-side management will also play a key role in reducing consumption costs and improving affordability for end-users,” he said.

In his welcome address, Chairman of PCAN, Obas Esiedesa, urged the government to come up with a fair, transparent, and socially responsible pricing framework that balances economic sustainability with public welfare.

While noting that the power sector continues to be weighed down by huge debt, a massive liquidity gap across the value chain, gas supply shortages, aging and weak transmission infrastructure, and rising foreign exchange costs that threaten investments and operations, Esiedesa, said tariffs must be set endangering the financial sustainability of the industry and deepening energy poverty among citizens.

“While operators demand cost-reflective tariffs as a condition for viability, millions of Nigerians continue to live in darkness or rely on expensive self-generation. According to the World Bank, about 85 million Nigerians, roughly 43 percent of our population, still lack access to grid electricity, making Nigeria home to the largest electricity access deficit in the world. This statistic is not just a number; it is a stark reminder of the scale of our national challenge and the urgency of reform.

“As journalists who follow this sector closely, we at PCAN understand that electricity pricing is more than a technical or economic issue — it is at the heart of Nigeria’s development, productivity, and quality of life,” the PCAN Chairman said.