Nigeria’s power crisis is more than a lack of electricity— It’s a political economy problem
By Adetayo Adegbemle, Executive Director and Convener, PowerUp Nigeria
Nigeria has reformed its power sector repeatedly over the past two decades, but the experience of households, businesses and hospitals has changed little.
The sector has undergone unbundling, privatisation, several tariff regimes, the Power Sector Recovery Programme and, most recently, reforms under the Electricity Act 2023. New measures include the CapEx Provision Account, the Band A compensation regime, net billing for embedded renewable energy and the emergence of state electricity markets.
Yet persistent poor service remains a defining feature of the sector.
According to Adetayo Adegbemle, Executive Director and Convener of PowerUp Nigeria, this persistence points to a problem that cannot be solved by engineering solutions or additional capital alone.
He argues that Nigeria’s electricity crisis is fundamentally a political economy problem, driven by weak institutions, conflicting incentives, poor policy credibility and unresolved distributional interests.
Adegbemle identifies five institutional reforms that could help address the deeper problems holding back the Nigerian Electricity Supply Industry.
1. Treat the liquidity crisis as a credibility problem
The liquidity crisis is often blamed on poor performance by Distribution Companies (DisCos), including weak collections, high technical and commercial losses and inadequate metering.
While these problems are real, Adegbemle argues that they do not tell the whole story.
Private investors in DisCos, GenCos and gas supply operate in a market where government policies have frequently changed or been overridden. Tariff freezes, delayed subsidy payments and settlement shortfalls have created uncertainty across the electricity value chain.
Under such conditions, he argues, underinvestment and efforts to protect revenue can become rational responses to an unpredictable regulatory environment.
The CapEx Provision Account directive, identified as Order NERC/2026/062, represents a step towards addressing this problem by requiring DisCos to ring-fence funds for capital expenditure.
However, Adegbemle argues that the principle must apply equally to government obligations.
He proposes a legally binding and judicially enforceable mechanism requiring the Federal Government to fund approved tariff shortfalls and subsidy commitments according to a fixed schedule, with penalties for late payment.
In his view, credible commitments must work in both directions.
2. Make metering a foundation for tariff reform
Nigeria’s metering gap is usually treated as a financing, procurement or manufacturing challenge.
Adegbemle argues that it is also a question of property rights and trust.
When electricity consumption cannot be accurately measured, disputes over bills become inevitable. Customers and DisCos have incentives to challenge, underestimate or negotiate bills, contributing to revenue losses and declining public confidence.
He therefore proposes linking accelerated metering investment with a clear local-content requirement for meter manufacturing and servicing.
Most importantly, he argues that customers should have access to reliable meters before further tariff increases are introduced.
Consumers, he says, are unlikely to accept cost-reflective tariffs if they cannot independently verify how much electricity they have consumed.
3. Protect NERC and NISO from political interference
Regulatory independence remains another major challenge.
The Nigerian Electricity Regulatory Commission (NERC) has demonstrated its willingness to take decisive action against underperforming utilities, including the dissolution of the board of Kaduna Electricity Distribution Company under Order NERC/2026/086.
But Adegbemle questions whether such independence depends too heavily on the individuals currently leading the institutions.
He argues that the independence of NERC and the Nigerian Independent System Operator (NISO) should be protected by law through ring-fenced funding, fixed terms for commissioners and removal only for clearly defined causes.
He also proposes requiring major regulatory decisions to be accompanied by public, reasoned orders so that they can be reviewed by the courts and scrutinised by the public.
For NISO, he argues that genuine independence requires financial and administrative arrangements that allow it to perform its market and system responsibilities without undue dependence on entities whose interests it may need to arbitrate.
4. Coordinate the growth of state electricity markets
The Electricity Act 2023 allows states to establish their own electricity markets, creating an opportunity for states to address local electricity challenges more directly.
But Adegbemle warns that decentralisation could create new problems if states operate without a common framework.
With multiple states developing independent regulatory commissions within an interconnected national electricity system, questions remain over cross-border wheeling, technical standards, market rules and dispute resolution.
He proposes a national harmonisation framework that would establish minimum technical and market-conduct standards for state electricity markets.
The framework should also provide for interstate settlements and disputes, with NERC serving as the final arbiter where necessary.
State regulators, he argues, should also publish tariff methodologies based on common cost-reflectivity principles.
Without such coordination, decentralisation could result in regulatory fragmentation and opportunities for states or market participants to exploit differences between jurisdictions.
5. Add political economy studies to technical audits
Technical audits remain essential to improving the sector.
NERC’s new guidelines for technical audits of the transmission system and the Transmission Company of Nigeria’s 6.5 per cent loss-reduction target are examples of the engineering and operational discipline required.
But technical audits cannot explain every persistent failure.
They can identify where losses occur, for example, but not necessarily why a DisCo continues to perform poorly after changes in ownership or management. They cannot, on their own, explain recurring vandalism in particular locations or why industrial consumers continue to rely heavily on self-generation despite improvements in grid supply.
Those questions involve incentives, local political interests, ownership structures, financing and public trust.
Adegbemle therefore proposes that regulators and National Assembly committees commission independent political economy studies alongside technical and financial audits whenever a utility is placed under intervention.
Such studies, he argues, should inform decisions on new investors, restructuring and long-term utility management.
The bigger issue
The five proposed reforms point to the same conclusion: Nigeria’s electricity crisis cannot be solved by adding more money or infrastructure without changing the incentives governing the sector.
Government agencies, DisCos, GenCos, state regulators and consumers all respond to the rules and incentives around them.
Where those rules are uncertain, commitments are not credible and institutions are vulnerable to political interference, actors will often prioritise short-term survival over long-term investment and cooperation.
Adegbemle argues that Nigeria therefore needs reforms that change what it is rational for participants in the electricity market to do.
These include enforceable commitments on both government and private-sector obligations, universal and reliable metering, stronger regulatory independence, coordinated decentralisation and the routine use of political economy analysis alongside technical assessments.
Nigeria has no shortage of technical reform plans. The bigger challenge, he argues, is designing institutions that can make those reforms credible, durable and capable of changing behaviour across the power sector.
Adetayo Adegbemle is the Executive Director and Convener of PowerUp Nigeria, a consumer rights and power sector policy advocacy organisation.
