The administration of President Bola Tinubu has indicated a potential rise in electricity tariffs nationwide, signaling a potential financial strain for the country’s citizens.
This development comes just two days after the Nigerian Electricity Regulatory Commission (NERC) sanctioned an increase in electricity tariffs for Band A customers.
Adebayo Adelabu, the Minister of Power, revealed this information during a press conference in Abuja on Friday, April 5, 2024. He stated that the recent tariff hike is part of a pilot program aimed at gradually eliminating electricity subsidies in Nigeria.
Adelabu explained that the government’s plan is to eradicate all subsidies in the sector to foster investment growth. “This tariff adjustment aligns with our policy of maintaining a short-term subsidized pricing system, with a transition plan to achieve a fully cost-reflective tariff over a period of, say, three years,” said the minister.
He emphasized that the government’s sensitivity to the hardships of the people is the reason for not immediately transitioning to a fully cost-reflective tariff or completely removing the power sector subsidy, as was done in the oil and gas sector.
“We don’t want to exacerbate the suffering any longer, which is why we’ve decided it should be a journey rather than a destination. The journey begins now, with a gradual shift from the subsidy regime to a full cost-reflective regime, starting with certain customers,” Adelabu added.
He described this as a pilot project for the Ministry of Power and its agencies, a proof of concept that those with sufficient infrastructure to provide stable power and enjoy 20 hours of electricity should be the first to experience the tariff increase.
Adelabu pointed out that the N225 per kilowatt-hour charged to Band A customers is relatively small compared to the N500 they pay for alternative energy sources like diesel. He noted that the government would have paid N2.9 trillion in subsidies for 2024, which is more than 10% of the national budget. He argued that it would be insensitive to force the government to pay such a subsidy when there are other pressing issues that require funding.
