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The short answer
Electricity tariffs in Nigeria are set by the Nigerian Electricity Regulatory Commission through the Multi-Year Tariff Order (MYTO), a model that adds up the cost of generating, transmitting and distributing power and allows for losses, inflation, exchange rates and gas prices. NERC issues periodic orders for each distribution company, and since 2020 tariffs differ by service band (A to E) according to hours of supply; under the Electricity Act 2023, states can now set rules for their own markets.
The short version
A tariff is meant to recover what it efficiently costs to get a unit of electricity (a kilowatt-hour, kWh) to your meter. MYTO builds that cost from each part of the supply chain, then NERC decides how much customers pay. Where the regulator or government holds the allowed tariff below the modelled cost, the gap is a tariff shortfall, historically met by federal government subsidy or left as debt in the market.
| Cost element | What it covers | Main drivers |
|---|---|---|
| Generation | Paying power stations for energy and capacity | Gas price (often set in US dollars), exchange rate, plant availability |
| Transmission | Transmission Company of Nigeria moving bulk power | Network costs, investment, losses on the grid |
| Distribution | The DisCo's network, staff, metering, billing and investment | Operating costs, allowed capital spending, inflation |
| Losses | Technical and commercial losses (aggregate technical, commercial and collection losses) | Allowed loss targets set by NERC |
| Market and regulatory charges | Market operator, NERC and other industry charges | Fixed percentages and budgets |
How MYTO works
MYTO is a multi-year price path. A major review resets the long-term assumptions for each company, including its asset base, allowed return, efficiency targets and investment plans. Between major reviews, NERC carries out minor reviews that update the macroeconomic inputs: inflation (Nigerian and US), the naira exchange rate, gas price and available generation capacity. In recent years these updates have been issued as supplementary orders, often monthly, for each DisCo.
- NERC estimates the revenue each company needs (its revenue requirement) for the period.
- It forecasts energy the DisCo will receive and sell, after allowed losses.
- Revenue requirement divided by expected sales gives a cost-reflective tariff per kWh.
- NERC sets the allowed tariff by customer class and band; the difference from the cost-reflective tariff is the shortfall.
Worked example (example figures)
A DisCo needs ₦30 billion in a month to cover its share of generation, transmission, its own costs and return. It expects to sell 200 million kWh after allowed losses. Its cost-reflective tariff is ₦30 billion ÷ 200 million = ₦150 per kWh. If NERC allows an average of ₦120 per kWh, customers pay ₦24 billion and ₦6 billion is shortfall. A weaker naira raises the generation cost in naira, which raises the cost-reflective figure even if nothing else changes.
Service bands: why your street pays a different rate
Since 2020, NERC has used a service-based tariff structure. Feeders are grouped into bands by the minimum average hours of supply customers receive each day, and the tariff depends on the band. Customers on bands with fewer hours pay less per kWh.
| Band | Minimum average supply per day |
|---|---|
| A | 20 hours |
| B | 16 hours |
| C | 12 hours |
| D | 8 hours |
| E | 4 hours |
In April 2024 NERC raised the Band A tariff to ₦225/kWh and in May 2024 revised it to ₦206.80/kWh, while tariffs for Bands B to E were held. Later supplementary orders have adjusted Band A further; check the current DisCo order on NERC's website. Our pages on bands A to E and how to check and challenge your band cover your rights when supply falls below your band.
What the Electricity Act 2023 changed
The Electricity Act 2023 allows states to make laws for and regulate electricity generation, transmission and distribution within the state. When a state sets up its own regulator and NERC completes the transfer of oversight, that state regulator issues tariff orders for the intra-state market, starting with Enugu. In those states the tariff methodology may differ from MYTO. In Lagos, for example, complaints and regulation now involve the state regulator; see electricity complaints in Lagos.
Who pays whom
Your payment goes to your DisCo. The DisCo pays the market operator and the Nigerian Bulk Electricity Trading company for the energy it receives, and those payments flow on to generation companies, gas suppliers and the transmission company. When DisCos collect less than their invoices, because of losses, unpaid bills or a tariff below cost, the shortfall is felt all the way back up the chain to gas suppliers, which in turn affects how much power is generated. That is why the regulator watches collection rates as closely as the tariff itself.
A short history of MYTO
| Order | Year | Notable change |
|---|---|---|
| MYTO 1 | 2008 | First multi-year tariff framework for the industry |
| MYTO 2 | 2012 | Fifteen-year tariff path set ahead of privatisation |
| MYTO 2015 | 2015 | Reset after privatisation using updated costs |
| MYTO 2020 and service-based tariffs | 2020 | Tariffs linked to hours of supply (bands A–E) |
| Supplementary orders | 2022 onward | Frequent minor reviews; Band A tariff moved separately from other bands from 2024 |
What you can check yourself
- Your band and the hours your feeder should get, in your DisCo's published feeder list.
- The tariff in the current NERC order for your DisCo and band.
- Whether you are billed by meter or by estimate; see estimated electricity bills.
- Your units per token; see how prepaid tokens work.
Questions people ask
Who sets electricity prices in Nigeria?
NERC sets tariffs through the Multi-Year Tariff Order. In states that have taken over regulation under the Electricity Act 2023, the state regulator sets tariffs for the intra-state market.
Why is Band A more expensive?
Band A feeders are meant to get at least 20 hours of supply a day. Tariffs are linked to service level, and Band A has been moved closer to cost while other bands were held.
How often do tariffs change?
Minor reviews update inflation, exchange rate, gas price and generation inputs, often monthly through supplementary orders. Major reviews reset the price path over several years.
What is the tariff shortfall?
The gap between the cost-reflective tariff calculated under MYTO and the allowed tariff customers pay. It has been funded by government subsidy or left as debt in the market.
Sources
- Nigerian Electricity Regulatory Commission (NERC): tariff orders · accessed Oct 2026
- NERC: Multi-Year Tariff Order and supplementary orders by DisCo · accessed Oct 2026
- Electricity Act 2023 (National Assembly) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.