Nigeria has reduced its electricity subsidy burden by 35% following a tariff increase rolled out last year for high-usage consumers, according to Power Minister Adebayo Adelabu.

The move, which marks a significant fiscal shift, comes as the government grapples with persistent challenges in the power sector, including an unreliable grid, mounting debts, and widespread reliance on costly backup generators.

Speaking at a press briefing in Abuja on Thursday, Adelabu said the targeted subsidy removal has generated “an additional 700 billion naira in revenue, reflecting a 70% increase,” significantly easing pressure on government finances.

Prior to the adjustment, Nigeria was spending nearly 200 billion naira ($125 million) each month to subsidize electricity, a cost the minister said was unsustainable given the non-commercial nature of existing tariffs.

Last year, the government eliminated subsidies for around 15% of electricity customers, mostly households and businesses with high power consumption.

Adelabu said this approach has not only brought relief to public spending but has also improved power generation capacity while shrinking the government’s tariff shortfall from 3 trillion naira to 1.9 trillion naira.

Despite these gains, the sector remains weighed down by deep-rooted structural issues.

Nigeria has an installed power capacity of 13,000 megawatts but struggles to generate even a third of that on most days, leaving millions dependent on expensive alternatives like diesel generators.

The situation is worsened by artificially low tariffs controlled by the state, which have historically been insufficient for electricity distribution companies to recover costs or settle payments with power generating firms.

As a result, debts in the sector have ballooned, with the government owing power generating companies over 4 trillion naira ($2.5 billion).

These debts have prompted repeated threats of plant shutdowns by stakeholders in the generation segment.

To manage the crisis, Adelabu revealed that the government plans to pay off half of the outstanding debts within the year.

This will be done through a combination of direct budgetary allocations and promissory notes, which the companies can discount or trade for immediate liquidity.

While the recent policy changes are a step toward a more sustainable power framework, the minister acknowledged that full reform would require consistent investment, regulatory adjustments, and private sector confidence.

Nonetheless, he maintained that the current measures have laid a foundation for further improvement.