By Uche Usim
The Nigerian Economic Summit Group (NESG) has raised concerns that the 2025 budget proposal has failed to sufficiently address the critical need for electricity tariff reforms. The group warned that this oversight could undermine efforts to attract private-sector investment and compromise the financial sustainability of the power sector.
In a report titled “2025 FGN Budget Analysis: Can The Budget Deliver a Major Economic Boost?” released on Sunday, NESG pointed out that while there are increased allocations to the power sector, the budget does not tackle the fundamental issues of non-cost-reflective tariffs and inadequate revenue collection that continue to plague Nigeria’s electricity market.
“The budget does not adequately address electricity tariff reforms, which are crucial for establishing cost-reflective pricing and attracting private-sector investment,” NESG stated. “Due to non-cost-reflective tariffs and poor revenue collection, many power distribution companies (DisCos) operate at a loss. Without necessary reforms to enhance the sector’s financial sustainability, the impact of increased budget allocations may be limited as power entities grapple with liquidity crises and operational inefficiencies,” the report added.
While acknowledging the federal government’s commitment to improving power sector infrastructure through the 2025 budget, NESG criticized the absence of a clear accountability and performance monitoring framework. The group warned that without such structures, the risk of fund misallocation, project abandonment, and underperformance of key initiatives would increase.
“Without robust monitoring mechanisms, there is a significant risk of fund misallocation, project abandonment, and the underperformance of planned initiatives,” NESG emphasized.
The group further stressed that merely increasing funding without embedding strong governance, transparency, and accountability practices would be insufficient to resolve the sector’s deep-rooted challenges. Successful reform, NESG argued, must address not only infrastructure gaps but also policy and regulatory hurdles, creating an enabling environment for private sector investment.
The power sector remains one of Nigeria’s most pressing infrastructure challenges, with far-reaching implications for industrial growth, job creation, and overall economic competitiveness. Analysts have long argued that cost-reflective tariffs are essential for attracting new investments and improving service delivery.
Without addressing the fundamental misalignments in tariff structures and operational efficiency, the increased public spending outlined in the 2025 budget may prove ineffective. Power companies would continue to struggle under the weight of debt and liquidity shortfalls, impeding progress in a sector critical to the country’s economic growth.
Nigeria’s electricity sector has faced numerous challenges for decades, including insufficient generation capacity, aging transmission infrastructure, and high levels of energy theft. Despite several rounds of reforms, progress has been slow, with many DisCos and generation companies (GenCos) heavily indebted and reliant on government bailouts to survive.
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