World Bank says the current electricity subsidy regime is wasteful and regressive, as it continues to undermine economic gains from ongoing reforms
World Bank Lead Economist for Nigeria, Alex Sienaert, stated this while presenting the May 2025 Nigeria Development Update (NDU) report in Abuja on Monday.
This is coming on the heels of recent revelation by the Minister of Power, Adebayo Adelabu that the Federal Government can no longer sustain payment of electricity subsidy, as it owes power-generating companies over N4 trillion debt.
Nigeria Electricity Regulatory Commission revealed that Nigeria spends approximately N200 billion on subsidies monthly.
Federal Government had alerted Nigerians to prepare for a fresh hike in electricity tariffs.
Minister of Power, Adelabu, in a statement recently signed by his spokesman, Bolaji Tunji, on Monday, said the new tariffs will reflect the true cost of electricity.
Adelabu, during a meeting with the chairmen of Nigeria’s Generating Companies (GenCos) in Abuja, said the country’s economy can no longer afford to pay for electricity subsidies.
“We have to understand that our economy cannot sustain subsidies indefinitely,” the minister said.
He added that government presently has an outstanding debt exceeding N4 trillion owed to GenCos for overdue subsidy payments.
World Bank, while calling on the Federal Government to address the electricity subsidy as it did with petrol subsidy, urged the government to sustain the ongoing reforms, including the removal of foreign exchange (FX) controls.
The global bank also urged the government to undertake more reforms to further improve macroeconomic and fiscal environment, that is critical for economic stability.
The bank added, “Eliminating the PMS subsidy and eliminating the FX subsidy have really been critical reasons why the fiscal situation has improved so dramatically. But of course, there’s still a range of fiscal policy and fiscal management issues where more can be done to safeguard the gains that have already been achieved
“So just to name, there is still one kind of wasteful, regressive subsidy, which is the electricity subsidy, so work to address that.”
Sienaert, while speaking, also commended the impact of reforms initiated so far, reporting that Nigeria has witnessed a notable acceleration in economic activity as GDP growth in 2023 reached its fastest pace since 2015, while the FX reforms helped achieve a more unified and stable exchange rate.
He said foreign reserves also rose, from a low of $32 billion to over $37 billion, with net reserves showing significant improvement.
“The bottom line is a 4.5% of GDP increase in total revenues in 2024, which is not something that, as economists looking across different countries and recovery stories, we see very often,” Sienaert noted.
N200bn paid monthly for electricity subsidies – FG
The Federal Government recently stated that it is now paying more in electricity subsidies for December, N199.64 billion, which is 2.76% higher than November’s N194.26 billion.
The Nigerian Electricity Regulatory Commission (NERC) made the announcement in its December 2024 price report posted on its website.
It stated that electricity rates stayed the same for all customer groups.
