Five panellists spent two hours on Nigeria's energy sector and never once blamed the turbines. Every answer came back to money that was owed and not paid.

Commissioner Dafe Akpeneye asked the audience to think about a litre of water. Before the fuel subsidy went, he said, a litre of bottled water cost more than a litre of petrol, and nobody found that strange. Rain falls and you have water. Petrol has to be found, lifted, refined and moved. The same inversion sits in electricity: a product that takes gas fields, pipelines, turbines and thousands of kilometres of wire to deliver is priced, for most Nigerians, below what it costs to make.

That was the regulator's way into the argument at Stransact's webinar on the energy industry on 30 September. Sola Arifayan, Chief Executive of Vios Energy, had already set the frame with two numbers. Nigeria has about 8,000 MW of generation available. It delivers about 4,500 MW. On the grid's best day on record, 2 March 2025, available generation reached 6,003 MW and 5,801.84 MW was evacuated at peak. Nobody on the panel disputed the gap. The argument was about why half the capacity never reaches a customer who pays for it.

Follow the kobo

Arifayan's explanation was losses at the distribution end. Average the eleven DisCos and losses run near 30 per cent, he said, on top of the 7 per cent allowed in transmission. For every 100 kilowatt hours generated, the sector collects for perhaps 60 to 65.

NERC's own figures say he is right almost to the kobo. In 2025 the DisCos received electricity valued at ₦3.68 trillion. They billed ₦2.99 trillion of it and collected ₦2.32 trillion. Sixty-three kobo in every naira of power delivered came back as cash. The second quarter of 2026 looked the same: billing efficiency of 78.67 per cent, collection efficiency of 81.06 per cent, and ₦201.9 billion of electricity delivered in three months that was never even billed.

"For every 100 kilowatt hours of power we generate, we're only able to collect for maybe 60 or 65 of that."

— Sola Arifayan, Vios Energy

The 37 kobo that goes missing has already been paid for in gas. It shows up as debt to the generating companies. Arifayan put that stock at about ₦6 trillion. The Federal Ministry of Power has used ₦4 trillion, and the GenCos dispute the reconciliation. The number that is not in dispute is the subsidy ledger. NERC's tariff orders for 2025 required a federal subsidy of ₦1.928 trillion to cover the gap between the cost-reflective tariff and what customers were allowed to be charged. Government budgeted ₦958 billion. By March 2026 it had paid ₦76.95 billion, roughly 4 per cent. The first quarter of 2026 added another ₦358.3 billion to the bill.

That is the mechanism behind every gas-supply headline. The GenCo is owed by the market; the market is owed by government; the gas producer is owed by the GenCo. "When you go to meet a gas company looking for a firm gas contract, it's a bit difficult," Arifayan said. He would know. His company trades over 250 MW of bulk power.

Gas is not the bottleneck people assume

Gas supplies 75 to 80 per cent of Nigeria's generation and nearly every large project in development is gas-fired. Arifayan questioned the habit of calling it a transition fuel: "I think it's a dominant fuel today, and it's going to be that for some time." Commissioner Akpeneye agreed. In the short to medium term, Nigeria is a gas country and gas is the baseload.

The detail that matters for pricing is that about half of domestic gas production is associated gas, a by-product the oil producer must move in order to lift crude. For that half, the producer needs an outlet, not a higher price. Arifayan would spend policy effort on pipeline integrity and on paying for delivered gas, not on the gas price. Fix those two and he doubts Nigerian gas production is unprofitable at any realistic domestic price.

Only Band A pays the real price

Then the tariff. The only customers paying a cost-reflective tariff in Nigeria today, the Commissioner said, are Band A, at about ₦209 per kilowatt hour. Everyone from Band B to Band E receives a subsidy element. The Electricity Act 2023 provides a Power Consumer Assistance Fund for vulnerable customers, but it assumes a market in which everyone else pays full cost. "You can't run subsidy on subsidy." Until the rest of the market moves to cost-reflective pricing, the Fund cannot be switched on, and deciding who is vulnerable is a policy call for the Minister of Power, not for NERC.

That question has a date on it. The Federal Government said on 31 July that it intends to phase out electricity subsidies from 2027, while ruling out an immediate tariff increase. Given that 96 per cent of the 2025 subsidy was still unpaid in March, the "phase-out" is partly an admission of what is already happening.

The Commissioner's reference point is telecoms. Airtime in 2001, at the exchange rate of the day, was among the most expensive in the world. Operators were allowed a cost-reflective tariff from the first day, built out their networks, and prices fell while the businesses stayed profitable. He also asked what "expensive" is measured against. Diesel self-generation costs around ₦800 per kilowatt hour before you count maintaining the generator. Arifayan was blunter: for the factory in Ogun State or the office in Victoria Island, the absence of power costs more than any tariff, even Band A rates across the board.

Kalu Uwagwu, Director of Deals and Advisory at Stransact, gave the view from the other side of the meter. Investors and the regulator say the tariff is not cost-reflective. The customer says the bill is unbearable. Both are reacting to the same number. Supply has improved, from under five hours a day in some areas to 12 or 14, and the improvement arrived with a bill people had not budgeted for. Under that pressure, he said, people are incentivised to beat the system, and bypass follows.

What a lender should actually underwrite

Arifayan's answer to "what makes this bankable" was not guarantees. A guarantee gives a generator perhaps three months of payment cover on a contract meant to run ten to twenty years, and calling it ends the relationship. Every bank guarantee costs a percentage in fees and, under Central Bank rules, capital that must be set aside. All of that flows back into the tariff. What he looks for is certainty of collection, all the way down the chain.

"We've got to connect the dots from the gas molecule in the field to the customer, and ensure there's enough cash coming in to pay everyone in that value chain."

— Sola Arifayan

What this means for you

If you are a CFO on Band A: your tariff is the only one in the country not waiting on a government cheque. That makes you the most reliable cash in the system, and you should expect DisCos and embedded generators to compete for you on service, not just price.

If you are a lender or an investor: price every power contract signed between now and 2027 on the assumption that the federal subsidy does not arrive, because in 2025 it mostly did not. The question for your credit committee is not whether the tariff is cost-reflective. It is who collects, how, and what share of collections is contractually yours.

If you are a developer: the gas is there. The pipeline integrity and the payment chain are what you are really underwriting.

The Stransact view

The 2027 subsidy exit is the sector's real deadline, and the 2025 ledger says it is already in effect. Every transaction we advise on now is modelled on collections, not on tariff orders. Next week we take the first link in that chain, the meter, and the financing model Uwagwu put on the table.

One participant, who runs a power-market data firm, asked how much of the shortfall is tariffs below cost and how much is losses, unbilled energy and unpaid bills. The panel did not reach it. Written answers go to all registrants, and the question sits inside the six parked for Nairobi.

---

This article first appeared on stransact.com. Doftwerks is the technology practice of Stransact Chartered Accountants.