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EBC Financial Group (EBC) notes that Nigeria’s electricity reform is entering a phase where higher tariffs, customer credits, and new rules on renewable self-generation will be judged by whether businesses actually receive reliable power and can reduce diesel backup costs.
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Under the Nigerian Electricity Regulatory Commission (NERC) Service-Based Tariff (SBT) system, Band A customers pay premium electricity tariffs in exchange for an expected minimum supply of 20 hours per day.
NERC’s latest compensation order sends a clear signal: if customers are paying a premium rate, they should receive the supply level they are paying for, and if they do not, they should be credited.
Why Power Reliability Is Now a Business-Cost Story
Nigeria’s power supply gap remains a direct cost for businesses. NERC’s April 2026 Operational Performance Factsheet showed that grid-connected power plants had a Plant Availability Factor (PAF) of 31%, with an average of 4,286 megawatts (MW) available for dispatch out of 13,625 MW of installed capacity.
When available grid power falls short of business needs, companies often have to keep backup generators running, adding fuel, maintenance, and planning costs to production.
The Central Bank of Nigeria (CBN) Business Expectations Survey for March 2026 identified insufficient power supply with an index reading of 74.5 as a leading business constraint, ahead of insecurity, high or multiple taxes, high interest rates, and financial problems.
Band A Compensation Tests Tariff Credibility
NERC’s compensation directive does more than reimburse customers for missed supply hours. It sets a precedent that premium tariff bands carry enforceable service obligations.
NERC issued Directive No. NERC/2026/002 on the Special Compensation of Band A Customers Arising from Grid Generation Constraints, covering eligible Band A customers affected by power shortfalls between February and March 2026.
Under the framework, smaller electricity users (Non-Maximum Demand customers) are to receive a credit equal to 20% of the approved February 2026 energy cap for the affected feeder.
Larger commercial and industrial users (Maximum Demand customers) are to receive 20% of the average energy billed per MD customer in February 2026.
Prepaid customers are to receive token credits, while postpaid customers are to receive bill adjustments. NERC also directed Distribution Companies (DisCos) not to offset compensation credits against existing customer debts.
The Hidden Cost of Unreliable Power
The cost of unreliable power does not stay inside the electricity bill. When a factory, supermarket, estate, logistics operator, or cold-storage facility pays a premium tariff but still relies on diesel backup, the associated costs are absorbed into operations.
These costs then flow through to production, inventory protection, food storage, transport pricing, and ultimately consumer prices. Customer credits help, but the wider sector still has to manage generation limits, revenue collection, and payments across the supply chain.
EBC Financial Group’s Analysis
David Precious, Senior Market Analyst at EBC Financial Group, said: “Nigeria’s power reform is moving into an accountability phase. Higher tariffs can only build confidence if customers and businesses receive the level of supply they are paying for. NERC’s Band A compensation order and the rollout of net billing point to the same market test: electricity reform must now be measured by delivery, transparent credit mechanisms, and whether businesses can reduce diesel backup costs.”
Net Billing Turns Self-Generation into a Business-Cost Question
Beyond customer credits, NERC’s Net Billing Regulations 2026, published on 3 June 2026, open a separate question for businesses already spending heavily on diesel and backup power: whether renewable self-generation can become a more reliable and cost-effective alternative.
The regulation creates a framework for eligible customers to generate renewable electricity, use what they need, and export any surplus power to distribution networks.
Many Nigerian businesses already invest in generators, diesel storage, solar systems, or hybrid power because grid supply is not reliable enough for production, refrigeration, logistics, retail operations, and business continuity. Net billing could make that investment more efficient by allowing eligible users to recover some value from excess renewable power rather than leaving it unused.
Qualification and Implementation
Qualifying solar or renewable systems must have installed capacity between 50 kilowatt peak (kWp) and 1.5 megawatt peak (MWp), making it more immediately relevant to commercial users, estates, shopping centres, manufacturers, institutions, and larger facilities.
Participants will need approval from their local distribution company, a technical feasibility review, a Net Billing Agreement, and NERC registration. Qualifying systems will require meters that record both electricity consumed and electricity exported.
Exported electricity will be credited at an export tariff approved by NERC, which will not necessarily match the price businesses pay for retail electricity purchases. That export tariff, together with metering, approval timelines, and settlement reliability, will determine whether net billing reduces actual costs or remains a regulation that has not yet translated into commercial value.
New Minister Adds an Implementation Test
The appointment of a new Minister of Power adds a wider delivery test to both reforms. President Bola Ahmed Tinubu swore in Joseph Olasunkanmi Tegbe as Minister of Power on 8 June 2026.
For businesses and investors, the question is not only whether Nigeria has new rules but whether the sector can implement them consistently—Band A credits applied on time, net billing approvals workable in practice, export tariffs transparent, and distribution companies collecting enough revenue to keep paying generators and transmission companies.
What Nigeria’s Electricity Market Will Watch Next
The next phase of Nigeria’s electricity reform may be judged by whether existing rules work in practice, not by new announcements. By 30 June 2026, the March Band A compensation deadline will show whether premium-tariff customers receive visible credits when supply falls short.
Net billing faces the same practical test: whether approvals, meters, export tariffs, and settlement processes can turn renewable self-generation into a real cost-saving option for eligible businesses.
Higher electricity prices may improve sector revenue, but they will not be enough if businesses still have to pay twice: once for premium grid supply and again for diesel backup.
