IMF warns Nigeria's power tariffs are fuelling fiscal crisis, demands urgent reforms
By Aboki Forex —
The International Monetary Fund has warned that Nigeria's below-cost electricity tariffs are creating hidden subsidies that are piling up as a dangerous liability for public finances.
In its 2026 Article IV Consultation Report on Nigeria, the IMF revealed that electricity sector arrears hit three-quarters of Nigeria's GDP by the end of 2025. The Fund urged the Federal Government to speed up power sector reforms to strengthen the country's fiscal position.
The IMF said the gap between what consumers pay and the actual cost of supplying power is generating implicit subsidies that weigh on the economy. It stated: 'Reforms in the energy sector are needed to reduce ongoing losses from the average tariff being below cost recovery and collection challenges, an implicit subsidy that constitutes a contingent liability.'
The report added that arrears are expected to rise by half a percentage point of GDP without decisive action. The IMF blamed the problem on poor collection by distribution companies and tariff structures that do not reflect the true cost of electricity supply.