Two days after the Nigerian Electricity Regulatory Commission (NERC) approved increase of electricity tariff for customers under the Band A classification, the Federal Government has hinted that a similar measure would be extended to others.
Speaking at a briefing in Abuja on Friday, Minister of Power, Adebayo Adelabu, said the recent increase in electricity tariff is a pilot in phasing out of electricity subsidy in the country.
He said the government plans to remove all subsidies in the sector to allow the thriving of investment in the power sector.
The Minister said: “This tariff review is in conformity with our policy thrust of maintaining a subsidized pricing regime in the short run or the short term with a transition plan to achieve a full cost reflective tariff for over a period of, let us say three years. I have mentioned it in a couple of media briefings that it is because of government sensitivity to the pains of our people that we will not make us migrate fully into a cost reflective tariff or to remove subsidy 100 percent in the power sector like it was done in oil and gas sector.”
“We are not ready to aggravate the sufferings any longer which is why we said it must be a journey rather than a destination and the journey starts from now on, that we should do a gradual migration from the subsidy regime to a full cost reflective regime and we must start with some customers.
“This is more like a pilot for us at the Ministry of Power and our agencies. It is like a proof of concept that those that have the infrastructure sufficient enough to deliver stable power of enjoying 20 hours of light to be the ones to get tariff add.”
The Minister added that the N225 kilowatt per hour Band A customers are charged as little in relative to the N500 they pay for alternative energy like diesel and others.
While explaining that Nigeria is experiencing a subsidy pricing regime where the government provides a large portion of the generation, transmission and distribution cost, he said the government was formerly subsidising 67 percent of the cost of electricity.
“The government would have paid N2.9tr for 2024. This is more than 10 percent of the national budget. It will be insensitive on our part to compel the government to pay such subsidy when we have other competing issues the government needs to fund under pau its of funds we have.”
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