Nigeria’s electricity tariff system is built around a simple idea: customers who receive more reliable electricity should pay more. But there is a bigger question that Nigeria’s power reforms have not fully answered: why should Nigerians be divided into different classes of electricity consumers in the first place?
Under the Nigerian Electricity Regulatory Commission’s (NERC) Service-Based Tariff framework, customers are placed in Bands A to E according to the minimum hours of electricity their feeders are expected to receive daily. Band A requires a minimum of 20 hours, Band B 16 hours, Band C 12 hours, Band D eight hours and Band E four hours. NERC says the system is designed to make tariffs reflect the service delivered by Distribution Companies (DisCos).
The logic sounds reasonable. If one area receives more power, it should pay more. But electricity is not an ordinary product that Nigerians can choose to buy at different quality levels. It is the same national electricity system serving homes, shops, factories, schools and hospitals across the country.
So why should access to more reliable electricity become a premium service?
The argument becomes more difficult when the difference between the bands is not simply the amount paid, but the quality of service Nigerians are expected to accept.
In April 2024, the Federal Government approved a tariff review that increased rates for Band A customers, while tariffs for Bands B to E remained frozen at the rates then applicable. NERC’s 2024 annual report said the review was implemented from April 1, 2024, as part of the move towards cost-reflective tariffs.
There is a strong financial argument for reform. Nigeria cannot build a reliable electricity market if tariffs consistently fall below the cost of supplying power. The World Bank said in June 2023 that annual electricity-sector fiscal subsidies had fallen from ₦581 billion in 2019 to ₦166 billion in 2022 as reforms progressed.
But the same subsidy system also exposed an inequality that should not be ignored. The World Bank’s Nigeria Public Finance Review found that about 80% of spending on tariff shortfalls benefited the richest 40% of the population, while only 8% benefited the poorest 40%. The reason was largely that wealthier households were more likely to have electricity access and consume more power.
That supports better-targeted subsidies. It does not necessarily settle the question of whether Nigerians should be permanently separated into different levels of electricity services.
On May 11, 2025, NERC ordered nine DisCos to compensate Band A customers on 152 feeders covering 557 streets after they failed to meet the required supply level in April. The compensation was to be provided through electricity credits or improved supply.
Then, on June 4, 2026, NERC approved a special compensation framework for eligible Band A customers affected by generation shortfalls between February and March 2026. The commission attributed the disruption largely to inadequate gas supply and vandalism of critical gas and transmission infrastructure.
If customers are paying more because they are promised better service, but the service can still be disrupted by problems elsewhere in the electricity chain, how meaningful is the separation between consumers?
NERC already has mechanisms for downgrading feeders and compensating customers when service commitments are not met. Its May 30, 2023 order established the framework for customer migration and compensation for service failures.
The regulator has also said that the objective of the Service-Based Tariff system is to improve service delivery and ensure that tariffs reflect the number of hours supplied.
That may work as a regulatory mechanism. But it should not become the final destination.
The aim of electricity reform should be to improve the entire system, not simply make the different bands more efficient.
NERC’s latest actions show that the sector is still being reshaped. On September 2, 2026, the commission issued the September 2026 Multi-Year Tariff Order. Seven days later, on September 9, it issued a revised order on DisCos’ use of earned non-administrative operating expenditure, saying the framework is intended to accelerate network upgrades, improve reliability and ensure revenues are invested in critical infrastructure.
Those reforms are necessary. But Nigeria should also be asking where the system is supposed to end.
Should Band A, B, C, D and E become permanent classes of electricity consumers? Should reliable electricity remain something some Nigerians pay a premium to receive while others are expected to settle for significantly fewer hours?
There is no argument here for returning to wasteful blanket subsidies or pretending that electricity can be supplied without paying its true cost. DisCos need enough revenue to maintain their networks, generation companies need to recover their costs and investors need confidence that the sector can survive financially.
But cost-reflective pricing does not have to mean permanent inequality in service.
If Band A represents what reliable electricity should look like, then the long-term goal should be to move more Nigerians towards that standard.
Nigeria needs a power system that is financially sustainable, but it also needs to ask a simple question: why should being on a different feeder mean being treated as a different class of electricity consumer?
We are all Nigerians. The tariff may need to reflect the cost of electricity, but reliable power should ultimately become the standard the system delivers, not a premium service available to those placed in the highest band.
