The International Monetary Fund concluded its 2026 Article IV consultation with Nigeria on 1 June, and in the assessment its Executive Board published on 9 June it again placed electricity among the structural reforms the country must prioritise. The Fund credited three years of difficult reform with improving stability, projecting growth of 4.1 per cent in 2026, even as inflation ticked up to 15.4 per cent in March and poverty remained high.
Alongside governance, security, agriculture and infrastructure, the directors named electricity a priority area for inclusive growth and diversification. On power, the Fund’s counsel has been consistent across consultations: resolve the sector’s liquidity crisis by moving tariffs toward cost recovery and phasing down the implicit subsidy that weighs on the public finances.
The case for that advice sits in the cash flows. Distribution companies collected just over 80 per cent of what they billed in the third quarter of 2025, and government subsidy still covered close to 59 per cent of generators’ invoices, with the Federal Government paying ₦458.75 billion in the quarter alone. With most tariff bands frozen at July 2024 levels and only the cost-reflective Band A adjusting, sector liabilities have been put at around ₦4 trillion.
That circular debt runs from distribution through generation to gas supply, and it is the reason gas-to-power, the backbone of Nigeria’s Energy Transition Plan, remains capital-starved. Until generators can reliably pay their gas suppliers and lenders, the investment the plan assumes will be hard to mobilise, which is why cost-reflective pricing keeps returning to the top of the Fund’s list.
Why this matters
Cost recovery tilts the field toward distributed power
A move toward cost-reflective grid tariffs is often read as a consumer-pricing story. For distributed and embedded generation it is a competitiveness story. As subsidised grid tariffs rise toward the true cost of supply, the gap that has long flattered grid power against self-generation narrows, and reliable power delivered next to demand at a predictable price becomes easier to justify on economics alone, not just availability.
That is the ground Nova occupies. Its captive gas and solar plants already supply commercial and industrial customers at a firm tariff while the grid stays unreliable and subsidised. A sector pushed toward cost recovery is also a more bankable one, which is precisely what the development-finance and institutional investors Nova is courting need to see. The Fund’s prescription, in other words, strengthens both the demand case and the financing case for the model Nova runs.