The Centre for the Promotion of Private Enterprise (CPPE) says Nigeria’s power sector remains one of the most complex and fragile components of the country’s economic reform agenda, warning that deep-rooted structural, financial and political economy constraints continue to undermine sustainable progress.
In a policy brief released on Sunday signed by the CEO, Dr. Muda Yusuf, CPPE noted that despite several reform attempts over the years, the electricity sector is still grappling with tariff distortions, weak investor capacity, transmission bottlenecks and a persistent liquidity crisis across the value chain.
According to the organisation, 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.
CPPE estimated that sector liabilities have risen to about ₦4 trillion, describing the current trajectory as fiscally unsustainable without deeper structural reforms, improved transparency and credible, phased implementation.
The policy brief observed that power sector reform is central to Nigeria’s economic competitiveness, industrial growth and social welfare, but progress has been slow and uneven.
CPPE attributed this to the tightly interconnected nature of the sector, where weaknesses in gas supply, generation, transmission or distribution quickly undermine the entire system.
It added that recent reforms, including foreign exchange unification and fuel subsidy removal, have intensified cost-of-living pressures and heightened resistance to electricity tariff adjustments, making power sector reform one of the most politically sensitive aspects of the government’s economic programme.
On tariff reform, CPPE identified capped electricity prices as a major constraint, noting that concerns over affordability have prevented the adoption of cost-reflective tariffs.
The group warned that without pricing reforms, the sector would remain unable to generate sufficient liquidity to sustain operations or attract new investment, forcing government to absorb inefficiencies and revenue shortfalls through repeated financial interventions.
Beyond tariffs, the policy brief highlighted structural weaknesses linked to the privatisation process, including concerns about the technical and financial capacity of some investors, gaps in due diligence and transparency, and persistent governance and operational inefficiencies, particularly among distribution companies (Discos) and the Transmission Company of Nigeria (TCN).
CPPE said public ownership and management of TCN has contributed to operational inefficiencies, underinvestment and slow network expansion, making transmission a major bottleneck in the sector.
However, it acknowledged that recent interventions under the Presidential Power Initiative have helped reduce the frequency of grid collapses.
The organisation also drew attention to the liquidity crisis across the power value chain, noting that generating companies are struggling to pay gas suppliers, while Discos are unable to generate enough revenue to meet their obligations to Gencos. These challenges, it said, have entrenched systemic financial distress and weakened investor confidence.
Given the scale of the crisis, CPPE stressed that government intervention has become unavoidable in the short term. Measures such as bond issuances to settle outstanding obligations to gas suppliers and Gencos were described as necessary to prevent a breakdown of electricity supply while longer-term reforms are pursued.
Despite the challenges, CPPE pointed to emerging positive developments, including the introduction of differentiated tariff bands such as Band A, increased decentralisation with states taking on greater regulatory roles, the expansion of independent power projects, and growing adoption of renewable energy solutions by households and businesses.
However, the group cautioned that the rising debt burden poses serious fiscal and transparency risks, stressing the need for proper verification, auditing and transparent management of all outstanding sector claims to avoid abuses similar to those experienced under previous fuel subsidy regimes.
In its recommendations, CPPE called for a clear and predictable roadmap toward cost-reflective tariffs, strengthened governance and accountability, stricter performance benchmarks for Discos, alternative management or concession models for TCN, and stronger support for decentralised and renewable energy solutions.
It also urged that government financial support to the sector be time-bound and tied to measurable reform milestones.
Dr Yusuf argued that power sector reform in Nigeria would be a long-term and incremental process rather than a quick fix.
He stressed that a balanced approach—combining short-term government support with medium- and long-term structural reforms—was essential to building a financially viable, reliable and inclusive power sector capable of supporting Nigeria’s economic growth.
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