By Editor
LAGOS – Nigeria's electricity sector reforms are entering a crucial phase as regulators move to enforce compensation for customers affected by power shortfalls and introduce a new framework aimed at encouraging renewable energy generation.
Market analysts say the coming weeks will determine whether recent reforms can translate into improved service delivery and lower energy costs for businesses and households.
According to a report by EBC Financial Group, the effectiveness of the reforms will be judged not by policy announcements but by tangible results, including reliable electricity supply, prompt compensation for service failures, and reduced reliance on diesel generators.
Under the Nigerian Electricity Regulatory Commission's (NERC) Service-Based Tariff system, Band A customers pay premium rates in return for a minimum of 20 hours of electricity supply daily. However, many consumers have complained that the promised supply levels are not always met.
To address the issue, NERC directed electricity distribution companies (DisCos) to compensate eligible Band A customers affected by power shortages between February and March 2026. The regulator set June 30 as the deadline for the payment of compensation for March, while affected customers are expected to receive credits through prepaid tokens or adjustments to postpaid bills.
Industry observers view the compensation directive as a major test of the credibility of the tariff regime.
Despite the higher tariffs, challenges remain within the power sector. NERC's April 2026 Operational Performance Factsheet revealed that the national grid operated at only 31 per cent of installed generation capacity, with 4,286 megawatts available for dispatch out of a total installed capacity of 13,625 megawatts.
The shortfall continues to affect businesses across the country, many of which depend on diesel-powered generators to keep operations running.
The Central Bank of Nigeria's March 2026 Business Expectations Survey identified inadequate electricity supply as one of the biggest challenges facing businesses, ranking ahead of insecurity, taxation concerns and access to finance.
Commenting on the situation, Senior Market Analyst at EBC Financial Group, David Precious, said the power sector had reached what he described as an accountability stage.
According to him, higher electricity tariffs can only gain public acceptance if consumers receive the level of service they are paying for.
"Higher tariffs can only build confidence if customers and businesses receive the level of supply they are paying for. Electricity reform must now be measured by delivery, transparent credit mechanisms and whether businesses can reduce diesel backup costs," he said.
Beyond customer compensation, attention is also focused on NERC's Net Billing Regulations 2026, which took effect earlier this month.
The regulation allows eligible consumers with renewable energy systems to generate electricity for their own use and export excess power to the distribution network for credits.
Analysts believe the initiative could provide significant benefits for manufacturers, commercial estates, shopping centres and other large-scale electricity users that have already invested in solar and hybrid power systems.
However, stakeholders say the success of the programme will depend on transparent export tariffs, efficient approval processes, proper metering and reliable payment mechanisms.
The recent appointment of Joseph Olasunkanmi Tegbe as Minister of Power has also heightened expectations within the sector, with consumers and investors looking to see how effectively ongoing reforms will be implemented.
As the June 30 compensation deadline approaches, industry watchers say the true test of Nigeria's electricity reforms will be whether consumers receive the benefits promised and whether businesses can finally reduce the burden of expensive alternative power sources.