– Examining the economic fault lines between energy pricing, subsidy sustainability and public welfare
By Anscella Obike
A City Running on Generators
At exactly 8:45 p.m., the streetlights in Jabi blink out again. The hum of generators rises almost instantly, filling the night with their metallic chorus. In a small tailoring shop nearby, Mrs. Ladi Okon, a mother of three, squints under the dim bulb powered by a fuel generator. “Light don go again,” she sighs, adjusting her sewing machine belt. “Every day I spend N6,000 on fuel. Sometimes I just lock up early; it’s no longer worth it.” Ladi’s struggle mirrors that of millions across Nigeria, a country where the high cost of fuel and gas has quietly deepened the crisis in the electricity sector. Behind every flickering bulb and whirring generator lies a tangled story of subsidies, foreign exchange struggles, and rising production costs that continue to push the nation’s power system to the brink.
Understanding the Chain Reaction: Fuel, Gas and Power Generation
Nigeria’s electricity is largely powered by gas. Out of the country’s major grid-connected power plants, more than 70 per cent are gas-fired stations. This means that when gas prices rise, electricity generation costs rise too. Gas producers sell to the power sector, and most of their contracts are priced in dollars. So, when global fuel prices increase or the naira loses value, power generation companies (GenCos) have to pay more to produce the same amount of electricity. As Engr. James Onuche, an Abuja-based electrical engineer, puts it: “You can’t separate fuel from light in Nigeria. If gas prices go up, – NEPA – bill must go up or government will pay the difference as subsidy.” That “difference” Onuche refers to is what’s now known as the electricity ‘subsidy explosion’, the widening gap between the actual cost of generating power and what Nigerians are charged for using it.
The Foreign Exchange Factor: Dollar and the Power Dilemma
The second fuel feeding the crisis isn’t gas; it’s the dollar. Because gas sales and much of the maintenance equipment for power plants are dollar-denominated, a weaker naira means higher costs for local companies. In 2024, when the naira crossed N1,500 per dollar, the cost of generating electricity shot up dramatically. Even gas producers demanded payments in dollars or dollar- equivalent rates. The power sector, however, earns its income in naira. This mismatch left the government with an impossible balance sheet: rising costs in dollars and shrinking revenue in naira.
Dr. Funmi Adeoye, an energy policy analyst, explains it simply: “Every time the naira falls, Nigeria’s power subsidy rises automatically. We import equipment and buy gas in dollars, but sell electricity in naira. It’s like filling a leaking bucket.”
The Subsidy Explosion: When the Bill Comes Due
By mid-2024, Nigeria’s electricity subsidy had ballooned to nearly N2 trillion. The government pays this to cover the gap between the true cost of power production and the lower tariffs consumers are charged. The chain looks like this:
- Fuel and gas prices rise.
- FX rates make gas and equipment costlier.
- Power plants demand more payment.
- The government steps in to cover the difference, and the subsidy bill explodes.
While these subsidies are meant to keep electricity affordable for ordinary Nigerians, they have also strained public finances. In some months, the subsidy for electricity nearly equalled the one for petrol before it was removed. A government source, who preferred anonymity, put it this way: “We are caught in a web. If we remove the subsidy, people will suffer. If we keep it, government debt grows. Either way, it’s burning from both ends.”
Impact on Citizens and Businesses: The Human Toll
In a roadside kiosk in Zaria, Aisha Bello sells soft drinks and sachet water. She laughs wearily when asked about the recent electricity situation. “Since this year, I no dey use freezer again,” she says. “If I put ice block, light no come. If I use generator, profit go finish. I just sell warm Coke now.” For small business owners like Aisha, each fuel price increase isn’t just an inconvenience; it’s a threat to survival. Students study in heat and darkness. Barbers and welders close early. Tailors can’t meet deadlines. According to the Manufacturers Association of Nigeria (MAN), over 35 per cent of production costs in small industries now go to powering generators. When these businesses can’t cope, jobs are lost, prices rise, and the economy suffers another shock. Emmanuel Uche, a barber in Lugbe, puts it bluntly: “If you hear generator for this area stop, just know say fuel don finish. We dey cut hair with sweat for face.”
Experts Weigh In: Economic Insight
Economists argue that Nigeria’s dependence on fuel and gas is an unsustainable cycle. Dr Adeoye insists that diversification is the only way forward: “Nigeria must invest seriously in renewable energy – solar, hydro, and wind – to reduce dependence on imported fuel and dollar-priced gas.
Otherwise, we’ll keep subsidising darkness.” Others point out that even gas producers face difficulties. Because of unpaid debts from government agencies and electricity distribution companies (DisCos), gas suppliers often reduce supply, leading to national blackouts.
In short, the system feeds on itself: - Rising gas costs raise generation costs.
- FX fluctuations increase debt.
- Subsidy spending climbs.
- Gas producers are owed money and cut supply.
- Power generation drops, and citizens suffer again.
The Government’s Tightrope: Balancing Reform and Reality
Government officials maintain that subsidy removal, both on fuel and electricity, is a necessary but painful reform. The Minister of Power, during a 2024 media briefing, argued that “Nigeria cannot afford to continue paying for inefficiency.” However, Nigerians remain sceptical. Many fear that removing subsidies entirely would make life unbearable. A middle-aged taxi driver in Gwagwalada, Malam Sule, voices this frustration: “Dem say dem go remove subsidy and life go better, but I no see am. Fuel high, light no come, everything don cost.” For now, the government is exploring partial solutions like solar distribution schemes and metering expansion. But for most Nigerians, those promises remain distant.
The Human Cost: Lights Out, Lives on Hold
Every night, across different towns, families adapt in small, heartbreaking ways, cooking earlier before the light goes, charging phones at roadside kiosks, and timing generator use like rationed medicine. At Karu, Mrs Jummai Yusuf, a teacher, describes her nightly routine: “I boil water for my children’s bath before 7 p.m., in case light go. If I forget, we use cold water. Sometimes, I just sit outside to catch breeze. We’re all tired.” While policies are debated in conference rooms, lives are quietly shrinking in living rooms, dimly lit, overheated, and burdened by the cost of survival.
Finding Light in the Shadows
The story of Nigeria’s electricity challenges isn’t just about fuel or finance; it’s about people like Ladi, Aisha, and Sule who bear the hidden weight of economic policy. As gas and FX costs keep pushing generation expenses higher, Nigeria faces a choice: continue pouring trillions into subsidies or reform its power mix for a sustainable future. For now, as the hum of generators continues to fill the night air, one truth remains: the real cost of power isn’t just in naira or dollars but in the sleepless struggles of millions waiting for the light to stay on.