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By Daniel Adaji
The Nigerian Independent System Operator (NISO) has called for a careful approach to tariff reforms in the power sector to ensure that higher electricity costs do not worsen the struggle of millions already facing energy poverty.
Speaking on Thursday in Abuja at the 5th Annual Power Correspondent Association of Nigeria Conference, the Managing Director and Chief Executive Officer of NISO, Engr. Abdu Mohammed, said the sector must find “the equilibrium between commercial sustainability and social fairnes, between ensuring that our operators remain viable and ensuring that no Nigerian is pushed further into energy poverty.”
The conference examined the theme: Cost Reflective Tariff vs. Energy Poverty: Finding a Pricing Balance in the Nigerian Power Sector.
His remarks come against the backdrop of ongoing tariff adjustments across the country, including Band A customers paying significantly higher rates per kilowatt-hour in a move designed to reduce the government’s subsidy burden. Nigeria recently cut electricity subsidies by about 35 per cent after raising tariffs for higher-consuming residential and commercial users.
Mohammed described tariff design as “the heartbeat of the power sector.” He said it influences whether utilities can recover costs, whether investors get credible returns, and whether consumers can afford to stay connected.
He explained that despite tariff reviews guided by the Multi-Year Tariff Order, persistent liquidity shortfalls, under-recovery by distribution companies, poor investment in infrastructure, and weak supply reliability continue to undermine progress and consumer confidence.
According to him, political and social pressures have kept tariffs “below actual cost levels,” creating a market that “struggles to attract investment, sustain operations, and deliver the level of service that Nigerians rightly expect.”
He stressed the need to confront the reality of energy poverty. “Energy poverty is not just about a lack of connection; it is about the inability to afford sufficient power for daily life and productive enterprise,” he said, adding that inflation and declining incomes have weakened people’s ability to pay more for electricity.
“The real question, therefore, is not whether we should have cost-reflective tariffs, but how to achieve them in a way that preserves affordability and protects the most vulnerable among us,” he stated.
To strike the right balance, he proposed “thoughtful, multidimensional strategies” including targeted subsidies that focus on low-income households instead of blanket support that distorts pricing and sustains inefficiencies. He said lifeline tariffs and welfare-linked rebates could protect those who need support the most.
He added that reducing technical, commercial, and collection losses would significantly lower costs for consumers. “Every percentage point of loss recovered translates directly to lower costs for consumers,” he said, calling for improved metering, grid automation, accurate data, and discipline across the industry.
Mohammed added that transparency must be “non-negotiable” to build investor confidence and ensure tariff reviews reflect verified performance improvements. He highlighted NISO’s deployment of digital monitoring tools and upgrades to grid management systems such as SCADA and Energy Management Systems as key steps toward accountability.
He also backed the decentralisation drive of the new Electricity Act, saying micro-grids, off-grid solutions and embedded generation could lower transmission costs and improve reliability.
Transitioning to cost-reflective pricing, he emphasized, should be gradual and tied to visible service improvements. “Consumers are more willing to pay when they experience reliability and fairness.”
Mohammed urged the Nigerian Electricity Regulatory Commission to maintain regulatory certainty to reassure investors and prevent political disruptions to tariff decisions.
He also pushed for reforms across the wider energy ecosystem, such as gas pricing reform and stronger data governance, to improve planning and lower the cost of power generation in the long term. Investments in energy efficiency, he said, would help consumers better manage consumption costs.
Above all, he said tariff adjustments must be explained clearly so that Nigerians understand they are meant to stabilize the power system, not punish the public.
“Ultimately, our collective goal is not simply to raise electricity prices, but to build a sector that works, a sector that can finance its own growth, sustain investor confidence, deliver reliable supply, and ensure that no Nigerian is left in the dark because of inability to pay,” he said.
“Cost-reflective tariffs and energy affordability are not mutually exclusive. With intelligent policy design, operational efficiency, and targeted social protection, they can coexist creating a sector that is financially sound and socially just,” he added.
He added that NISO remains committed to promoting transparency, reliability and fairness for all participants in the Nigerian electricity market. “Together, let us continue to build a power sector that powers not just homes and industries, but also the hopes, dignity, and prosperity of our nation,” he said.