How to achieve effective power reforms, by Yusuf

Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, yesterday said the nation’s power sector reform remains a long-term and incremental process rather than a quick fix.

He said the sector’s complexity, political economy constraints, and institutional weaknesses make progress gradual rather than instant.

According to him, without decisive action to address structural inefficiencies, improve governance, and ensure fiscal discipline, the current trajectory will remain unsustainable.

He noted that despite multiple reform efforts over the years, the sector continues to face deep structural, financial, and governance challenges.

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

He added 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,” Yusuf said.

According to him, the current trajectory, characterised by rising sector debt currently at about N4 trillion, is fiscally unsustainable without deeper structural corrections, improved transparency, and gradual but credible reform implementation.

He 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.

He pointed out that the current financing model for the sector is not sustainable based on the sector’s liabilities which have risen to nearly N4 trillion and continue to grow.

He stressed 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 said.

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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.

He said government should implement a phased and predictable transition toward cost-reflective pricing, with targeted social protection for vulnerable consumers.

He said the phased transition 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.

He noted the urgency in addressing the distribution sector weaknesses by enforcing performance benchmarks for distribution companies, including recapitalisation, technical upgrades, and loss reduction.

He 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 decentralisation 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 said.