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Building measurable, cost-reflective tariffs in state electricity markets

by Masah Emmanuel Ikus
August 17, 2026
in Comments
tariffs

For more than a decade, Nigeria’s power sector reform has been trapped in a single, exhausting debate: How do we achieve a cost-reflective tariff?

 

To distribution companies, cost-reflectivity represents the essential pathway to financial survival. To private investors, it is the fundamental precondition for project bankability and capital deployment. To consumers, however, the phrase has come to sound like a relentless euphemism for paying higher bills for darkness and grid countless collapse. To regulators, it has consistently been treated as the ultimate destination of utility reform. 

Yet after endless tariff reviews, subsidy interventions, emergency market bailouts, regulatory orders and billions of dollars spent, the outcome across the Nigerian Electricity Supply Industry remains stubbornly unchanged: liquidity crises, systemic under-investment, operational failure, and widespread public distrust.

 

This 5-part series advances an inconvenient truth: The core crisis of Nigeria’s power sector is not a tariff problem. It is a data  problem. 

 

The blind spot in price regulation

We are attempting to engineer cost-reflective tariffs in a market where the underlying costs, technical losses, commercial collections, and actual service levels are neither independently measured nor transparently verified. This is why most government intervention programmes struggle to survive when they confront operational realities on ground vs the aggregated assumptions used in developing them.

 

A tariff cannot be genuinely cost-reflective if regulators cannot distinguish between efficient operational expenses and the inflated costs of utility waste, unmetered leakage, and uncollected revenue. Without trusted data, tariff-setting becomes an exercise in guesswork—a political compromise where opinions override evidence and assumptions replace accountability.

 

Before you regulate tariffs, regulate data. Because before prices can genuinely reflect costs, regulators must first establish the truth.

Before a regulator can regulate prices, it must first establish the truth. Because in electricity governance, a fundamental principle remains unbroken: You cannot regulate what you cannot measure.

 

The subnational opportunity

The passage of the Electricity Act 2023 has fundamentally altered the landscape, dismantling the federal monopoly and empowering state governments to shape their own electricity destinies. As new State Electricity Regulatory Commissions (SERCs) emerge across the country, they face a historic crossroad. They can inherit the flawed legacy of traditional federal regulation—spending years in endless tariff battles while infrastructure decays—or they can adopt a practical, data-first regulatory architecture from day one.

 

Emerging state regulators must move closer to the point of service delivery—closer to the customer, closer to the network, and closer to the data. The feeder is where electricity is delivered, where losses occur, where revenue is collected, and where consumers experience utility performance. 

 

The 5-part blueprint

This series outlines a comprehensive, actionable framework for state energy governance: 

Part 1: Cost-Reflective Tariffs Require Cost-Reflective Data

Part 2: Consumers Cannot Be Protected from What Regulators Cannot Measure

Part 3: The Missing Link—From DisCo Regulation to Feeder Regulation

Part 4: Rewarding Performance, Not Expenditure

Part 5: Franchising, Transparency, and the Digital Regulator

 

Ultimately, this blueprint centers on a simple commercial reality: Because consumers do not purchase utility expenditures—they purchase reliable electricity service. The most effective regulatory systems are those that reward utilities not for what they spend, but for what they deliver. 

 

The states that succeed will not be those with the most complex tariff formulas, but those that build transparent, measurable, and digitally enabled power markets. It is time to shift from guessing to measuring, and from managing expenditure to guaranteeing performance.

 

Welcome to the series.

_____________________________________________

Next Week: Part 1: Cost-Reflective Tariffs Require Cost-Reflective Data

 

  • business a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com
Masah Emmanuel Ikus

Masah Emmanuel Ikus is a Power and Energy Infrastructure Strategist and the Principal Consulting Partner at EMI Resources Limited. A University of Lagos-trained Electrical Engineer with an EMBA from Lagos Business School, he possesses over 27 years of experience managing complex infrastructure projects across the ICT, Oil & Gas, and Power sectors, specialising in the design of decentralised power systems and solar integration. He currently advises investors, project sponsors, and public institutions on leveraging Nigeria’s energy deficit into bankable commercial opportunities. He can be contacted via masahikus@gmail.com

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Methane rules spread across 67% of global production as Nigeria faces compliance test 

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Onafriq, a pan-African payments company, is set to discontinue its Baxi agent banking business in Nigeria after five years, citing naira depreciation, rising operating costs and intensifying competition that have weakened the segment’s profitability. The planned shutdown will affect the agent banking operations conducted through Baxi under Onafriq Nigeria Payments Limited. However, the decision does not signal the company’s withdrawal from Nigeria, as it intends to retain its cross-border payments network and card issuing services in the country. In a statement, Onafriq said changes in Nigeria’s operating environment since 2024 had significantly altered the economics of its offline agent banking business, making the existing model unsustainable. The move marks a strategic shift for the company, which entered Nigeria’s agent banking market to expand access to financial services through a network of agents providing transaction services outside traditional bank branches. Onafriq attributed the decision to a combination of macroeconomic pressures and structural changes in the country’s payments industry. According to the company, naira depreciation and inflation have affected transaction volumes, increased operating expenses and undermined the sustainability of its agent banking operations. The growing adoption of instant account-to-account transfers has also changed the mix of transactions handled by agents, while heightened competition among payment service providers has put further pressure on margins. These developments have made it increasingly difficult for the business to remain viable under its existing operating structure, prompting the company to reassess its long-term strategy. Dare Okoudjou, founder and chief executive officer of Onafriq, said the decision to close the business was difficult, particularly given the efforts of employees, agents and business partners who helped build the Baxi network. “We entered Nigeria with conviction and commitment, but did not achieve the outcome we set out for. Closing this business was a difficult decision to arrive at, one that affects colleagues, agents, and business partners across Nigeria who poured their hearts and soul into building out the Baxi network,” Okoudjou said. Despite the closure, he reaffirmed the company’s commitment to the Nigerian market, noting that the group would continue to serve customers through its payments network and card issuing operations. Onafriq entered Nigeria’s agent banking market in 2021 through the acquisition of Baxi, also known as Capricorn Digital Limited. The company said it continued investing in the business through 2023, with efforts focused on expanding and strengthening its agent network. However, a subsequent review of the business’s long-term prospects and financial sustainability led to the decision to wind down the operation. As part of the transition, Onafriq said agents onboarded through the Baxi platform had been moved to another principal bank, a step intended to facilitate continuity for the affected agents. The company has also directed agents to transfer their funds to their preferred principal bank within 30 days, adding that its teams would provide support throughout the transition process. Employees whose roles are linked to the agent banking business will also be consulted and supported during the wind-down, with Onafriq pledging to treat affected workers fairly.

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