Development lender says tariff shortfalls reached $2.45bn in 2025 as over 86 million Nigerians remain without electricity access….
The World Bank Group is set to support reforms to Nigeria’s electricity tariff and subsidy systems as part of a broader effort to address the financial crisis in the power sector and create a more sustainable electricity market.
The commitment was contained in the World Bank’s Country Partnership Framework for Nigeria covering the 2026 to 2032 fiscal years.
Under the six-year framework, the development finance institution said it would work with the Nigerian government to improve access to electricity and make power supply more reliable for households and businesses.
The programme will cover both grid-connected and off-grid electricity solutions and will be aligned with the targets contained in Nigeria’s Mission 300 Compact.
A major component of the intervention will focus on reforms to the way electricity tariffs and subsidies are structured.
The World Bank said it would support measures aimed at restoring the financial sustainability of the power sector, alongside competitive investment planning and stronger sector regulation.
The planned reforms come against the backdrop of persistent financial difficulties across Nigeria’s electricity value chain, with inadequate revenue and tariff shortfalls continuing to affect the ability of operators to invest in infrastructure and maintain reliable supply.
$2.45bn Tariff Shortfall
The World Bank said Nigeria continues to face one of the world’s largest electricity access deficits, with more than 86 million people currently without access to electricity.
For those connected to the national grid, frequent outages have also forced households and businesses to rely heavily on private generators, increasing operating costs and putting additional pressure on household incomes.
The bank said the financial position of Nigeria’s electricity sector remained unsustainable, with tariff shortfalls estimated at $2.45 billion by the end of 2025.
The funding gap has remained one of the major challenges facing the sector, particularly as electricity tariffs have historically failed to fully reflect the cost of supplying power.
The World Bank’s intervention is therefore expected to focus not only on expanding electricity infrastructure but also on addressing the underlying financial weaknesses that have limited investment across the sector.
World Bank Targets Renewable Energy Investment
Beyond reforms to tariffs and subsidies, the World Bank said it would work to mobilise more private capital for renewable energy projects and the expansion of Nigeria’s electricity grid.
The objective is to improve the resilience of the power system while simultaneously expanding access and keeping electricity affordable.
The bank said it would continue supporting the Nigeria Distributed Access through Renewable Energy Scale-up platform, designed to attract private investment into mini-grid projects and standalone solar systems.
The initiative is expected to help expand electricity access in communities that remain underserved or are located far from the national grid.
By combining grid expansion with decentralised renewable energy systems, the World Bank said Nigeria would be better positioned to reach communities that cannot be efficiently served through conventional grid infrastructure alone.
Private Investment At The Centre Of Strategy
The World Bank also plans to support the Federal Government in developing stronger public-private partnership structures and investment frameworks covering electricity generation, transmission and distribution.
Its assistance will include preparing projects, structuring transactions and establishing transparent competitive processes that can give private investors greater confidence to commit capital to the sector.
The bank believes greater private-sector participation will be essential to closing Nigeria’s electricity infrastructure and financing gaps.
It said the combination of its off-grid and on-grid interventions under the new Country Partnership Framework is expected to provide electricity access to more than 32 million Nigerians.
Subsidy Burden Remains A Major Challenge
The planned reforms are coming at a time when the Federal Government is under pressure to address the long-running financial burden associated with electricity subsidies.
For years, electricity tariffs were kept below the cost of supplying power, leaving government responsible for covering the resulting gap between what consumers paid and the actual cost incurred by operators.
However, delays and shortfalls in government payments have contributed significantly to the liquidity challenges affecting the electricity market.
The resulting financial strain has made it difficult for operators across the power value chain to settle obligations, maintain infrastructure and make the investments required to improve supply.
The World Bank’s proposed support for tariff and subsidy reforms is therefore expected to form part of a wider effort to establish a power market capable of generating enough revenue to sustain operations and attract fresh investment.
Power Minister Joseph Tegbe recently said the liquidity challenges confronting the sector would be addressed next year, signalling further efforts by the Federal Government to tackle the financial weaknesses affecting electricity supply.
With the World Bank now committing support to tariff, subsidy and investment reforms, the coming years could see a significant restructuring of how electricity is priced, subsidised and financed in Nigeria.
The broader objective is to move the sector away from chronic financial instability while expanding access to reliable electricity for households, businesses and communities across the country.
