Expert charts path for effective power reforms

As the nation continue to grapple with electricity challenges, irrespective of the reforms being implemented , stakeholders and economists in the country have said the Power sector reform in the country remains a long-term and incremental process rather than a quick fix.

They based their submission on the sector’s complexity, political economy constraints, and institutional weaknesses, which would make the progress gradual rather than instant, warning that without decisive action to address structural inefficiencies, improve governance, and ensure fiscal discipline, the current trajectory will remain unsustainable.

An economist and Chief Executive, Center for the promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, noted that despite multiple reform efforts over the years, the sector continues to face deep structural, financial, and governance challenges.

These challenges, he said, are multi-dimensional, spanning political economy constraints, tariff distortions, weak investor capacity, transmission bottlenecks, and a persistent liquidity crisis across the value chain.

He argued that the inability to implement a fully cost-reflective tariff regime—largely due to social and political sensitivities following recent macroeconomic reforms—has entrenched subsidy dependence and widened the sector’s financing gap, thereby making government intervention to become unavoidable in the short term to prevent system collapse and sustain electricity.

He listed recent macroeconomic reforms, including foreign exchange unification and fuel subsidy removal, to have further complicated the reform environment by heightening cost-of-living pressures and intensifying resistance to tariff adjustments in the power sector.

“However, without cost-reflective pricing, the sector is unable to generate sufficient liquidity to sustain operations or attract new investment. The resulting subsidy burden has forced government to repeatedly intervene financially, effectively transferring inefficiencies and revenue shortfalls onto the public balance sheet,” the CPPE boss said.
Yusuf made it known that the current trajectory, characterised by rising sector debt currently at about ₦4 trillion, is fiscally unsustainable without deeper structural corrections, improved transparency, and gradual but credible reform implementation.

Giving an analysis of the sector, yesterday, the CPPE helmsman advocated for a balanced approach-one that combines short-term government support with medium- to long-term structural reform. This, he noted, is essential to building a financially viable, reliable, and inclusive power sector that can support Nigeria’s economic growth and development.

According to Yusuf, the current financing model for the sector is not sustainable. He’s arguement is based on the sector’s liabilities which have risen to nearly ₦4 trillion and continue to grow.

He therefore warned that there is an urgent need to ensure that all outstanding claims are properly verified; subjected to rigorous audit and managed transparently and credibly.

“Nigeria’s experience with fuel subsidy regimes demonstrates the vulnerability of subsidy systems to abuse and malpractice. Strong oversight and accountability mechanisms are therefore essential to prevent similar outcomes in the power sector,” Yusuf warned.

He noted that one of the major problems that has. Continued to weigh on the finances of the sector is the lack of a cost reflective tariff regime.

To address this, Yusuf, a policy analyst, admonished for the implementation of a phased and predictable transition toward cost-reflective pricing, with targeted social protection for vulnerable consumers.

This, he said, should be backed by a strong governance and accountability regime which will be targeted at improving transparency in subsidy management, debt verification, and financial settlements.

Importantly, he further added, is the urgency in addressing the distribution sector weaknesses. This will be by way of enforcing performance benchmarks for Discos, including recapitalisation, technical upgrades, and loss reduction.

The CPPE boss also canvassed for a reform in transmission management by exploring alternative management or concession models for TCN to improve efficiency and investment.

“It is important to support decentralization and renewables; encourage state-level initiatives, independent power projects, and renewable energy adoption to reduce pressure on the national grid. Also, we need to limit fiscal exposure as government financial support should be clearly time-bound and linked to measurable reform milestones,” Yusuf argued.