Quest for cost-reflective electricity tariffs in Nigeria: Managing the conflict between politics and economics

Abstract

In order to increase efficiency and attract private sector investment in the electric power sector, most countries, including Nigeria, have liberalized and in some instances unbundled their electric power sector. However, despite the involvement of the private sector in the operation of electric sector assets, governments have found it difficult to transition into a cost-reflective tariff driven electricity industry, resorting instead to a subsidy propelled regime. This has created sever liquidity in the often nascent and evolving electric power sectors with governments unable to afford these subsidies. This paper reflects on the reason for this state of affairs in  Nigeria despite a legal framework that demands the institution of a cost reflective market. This paper concludes that the problem before the  government has been finding ways of managing the competing interests of politics and economics in dealing with a social infrastructure like electric power. Finally, the paper suggests ways of balancing this conflict and  charting a path to a sustainable electric power sector in Nigeria.

Keywords: Electricity Tariffs in Nigeria, Cost, Politics, Economics