The Federal Government has identified the financial structure of Nigeria’s electricity market as a major obstacle to achieving steady power supply, saying sustainable improvements will require tariffs that reflect the cost of efficient service delivery.
The warning was given by the Special Adviser to the President on Power, Lanre Babalola, at the Lagos Energy Summit 2026 on Tuesday.
Babalola, represented by Engr Uzoma Achinanya of the Presidential Task Force on Power Sector Reset and Restoration, said the government was working towards creating an electricity market capable of attracting investors and supporting long-term power generation.
He explained that generating electricity alone would not solve the country’s power problems unless the companies producing electricity and supplying gas were also guaranteed payment.
According to him, the government is considering financial safeguards, including protected revenue arrangements and credit support, to address the funding challenges affecting the industry.
Babalola warned against making electricity consumers pay for inefficiencies in the sector, insisting that tariffs should be based on the actual cost of providing efficient services.
“tariffs that are reflective of efficient cost, not a bill that passes inefficiency on to customers”.
He said Nigeria’s electricity market had spent years prioritising the movement of electricity to consumers without establishing an equally effective system for ensuring that payments reached power producers and gas suppliers.
“Fix both circuits. One circuit carries power to the customer, the other carries money back to the generator and the gas supplier behind it. For 20 years, we focused on the first and neglected the second. Power that flows on day one will stop on day 90 if the money does not flow back,” he declared.
He further called for electricity revenues to be protected from diversion so that companies involved in generating and supplying power could meet their contractual obligations.
“Government, federal or state, should secure the unhindered flow of power and of adequate revenue back. Revenues from new power should be ring-fenced to the contracts that brought it into being,” he cautioned.
The presidential adviser also recommended the use of escrow accounts, structured payment systems and improved revenue tracking to guarantee payments across the electricity value chain.
He added that government-backed financial guarantees could help reduce investment risks, particularly where the market was not yet strong enough to support major electricity projects independently.
Meanwhile, Power Minister Joseph Tegbe said the Federal Government had developed a four-area intervention plan to improve electricity supply nationwide.
The strategy focuses on strengthening the national grid, resolving financial challenges in the power industry, improving the performance of existing facilities and expanding transmission infrastructure.
Tegbe disclosed that the government was also working to match electricity generation with transmission and distribution capacity in major economic centres.
He said some power plants affected by recent disruptions had resumed operations, while the damaged Egbin-Benin transmission line had been restored.
According to the minister, Lagos received about 1,000 megawatts during the recovery process, although efforts were still ongoing to address supply interruptions.
Speaking at the summit, Lagos State Commissioner for Energy and Mineral Resources, Biodun Ogunleye, revealed that electricity demand in the state had reached an estimated 12,000 megawatts, while supply from the national grid remained below 1,000 megawatts.
He said the huge gap had left residents and businesses spending heavily on alternative electricity sources.
Ogunleye noted that Lagos had begun building its independent electricity market following the passage of the Electricity Act 2023 and the signing of the state’s electricity law by Governor Babajide Sanwo-Olu in December 2024.
He said regulatory institutions had since been established to oversee the market, encourage private investment and strengthen consumer protection.
The commissioner also highlighted the state’s Seven-Point Energy Agenda, which includes improving federal-state cooperation, expanding electricity generation, strengthening distribution networks and adopting modern energy technologies.
He said the initiative was aimed at developing a reliable electricity system capable of supporting businesses, creating jobs and attracting investments.
He said, “Our ambition is not simply to generate more electricity, but to establish a functional power economy that supports industrial growth, creates employment, attracts capital and delivers tangible improvements in the lives of our people.”
Despite the proposed reforms, the Federal Government has maintained that there is no immediate plan to increase electricity tariffs.
