…Says N2.9trn electricity subsidy unsustainable
…Review strategic step for more sustainable, efficient, equitable sector – Idris
The Minister of Power, Mr. Adebayo Adelabu, has reiterated the federal government’s commitment to continue to subsidise electricity for Nigerians in order to guarantee stable and reliable supply.
Adelabu said this Friday in Abuja at the Ministerial Press Briefing Series organised by the Ministry of Information and National Orientation while giving explanations on the April 2024 Supplementary Multi-Year Tariff Order (MYTO) that the Nigerian Electricity Regulatory Commission (NERC) released Wednesday.
He said the recent increase in tariff affected only a small percentage of the country’s population, adding that the majority of Nigerians would continue to enjoy government’s subsidies.
The Nigerian Electricity Regulatory Commission (NERC) had announced an increase in electricity tariff paid by Band A customers from N68/KWh to N225KWh.
He said Band A customers were those who enjoyed electricity supply for 20 hours per day.
“From the latest statistics, we have about 12 million customers in the sector and this (tariff increase) will only affect about 1.5 million customers.
“The remaining 10 .5 million customers will continue to enjoy government’s subsidies, which is almost 70 per cent of the population.
“This review is in conformity with our policy thrust of maintaining a subsidised pricing regime in the short run or in the short term with a transition plan to achieving a full cost reflective tariff for the sector over a period of three years,” he said.
He said before the tariff increase, the government was subsidising the cost of producing and transmitting electricity in the country by more than 50 per cent.
Adelabu said the government decided not to migrate to a cost- reflective tariff or remove subsidy 100 per cent because it was sensitive to the pains being experienced by Nigerians presently.
He said the removal of subsidies would be a journey rather than a destination, adding that it would be a gradual migration from the subsidy regime to a full cost-reflective tariff regime.
N2.9trn not sustainable
The government insisted that the payment of N2.9 trillion for electricity subsidies in 2024 “is no longer sustainable.”
Adelabu stressed that it would be insensitive to compel the government to keep paying the unsustainable subsidies.
“So, it will be very insensitive on our part to compel the government to continue to subsidise at that rate of almost N3 trillion for the power sector alone. We just have to be realistic and considerate. The fund is about 67% of the cost of power production in the country.
He also said the cost “is about 10% of the national budget” that could be channelled towards development of infrastructure in health, education, and the others.
“And I must tell you that as of today, before the introduction of the tariff increase, the government is subsidising nothing less than 67 per cent of the cost of producing, transmitting, and distributing electricity in Nigeria.
“At the current exchange rate this is going to translate into N2.9 trillion for 2024. This is more than 10 per cent of the national budget.”
The minister had earlier noted that the primary purpose of investing in a business was operational sustainability to recover cost and also make profits.
According to the minister, the possibility of remaining in business is always doubtful when investors cannot recover their cost.
He described the tariff for Band A customers of the Nigerian Electricity Supply Industry (NESI) as “pro-poor because it affects only 15 per cent of the customers.”
He said the Band A tariff was still 50 per cent cheaper for the customers than what they spent on alternative power generation with the premium motor spirit (PMS) petrol and the automotive gas oil (AGO) diesel.
“We know ourselves. 90 per cent of the customers that fall into this band, if there’s no light they will not hesitate to switch on their generators; 1, 000 litres of diesel and petrol generators. They even pay for many expensive alternatives.”
According to him, other customers in the industry still enjoy the subsidy on electricity.
He urged the Band A customers whose supply was no longer cheap to adopt frugality and efficient consumption management.
“It is not about what you pay per kilowatt hour. It is about consumption. We have to be efficient in managing our consumption too.
“So, I enjoin us to be very prudent in consuming electricity, it is no longer cheap for band A. But this policy is pro -poor like the EVC put it. It is pro-poor. The high end people, they are the ones that are enjoying the subsiding more than others because they consume more.
“This is because what they are enjoying is more than what the poor are enjoying. We are saying no, let them pay the right price, and let the poor breathe too.”
Adelabu said the tariff adjustment for the Band A customers was a pilot project, adding that there must be a proof of consent.
He said the tariff was based on capacity of the operators to supply the minimum of 20 hours of electricity in a day, adding that where the DisCos “cannot cope with the 20 hours supply, the customers will be downgraded to a lower band.”
The minister stressed that under the new rate, the NERC must ensure that the non-complying operators were punished.
He pledged that the ministry under his watch must protect the consumer to ensure that their payment was proportional to the quality of service the operators delivered to them.
“We also must ensure that the regulators are independent and there is consequent management for non-compliance by the operators in terms of punishment meted out to a non-complying power sector player being it a distribution company, the transmission company or any of the generating companies.
“Then last one we must achieve as the ministry is consumer protection and value for money. Whatever the consumer pays for, there must be commensurate value for it.”
Zungeru power plant
He said the Zungeru hydroelectric power plant had been completed and installed, adding that the concessioning process had also completed, while the concessionaire had made his payment.
“The official handing over of this plant has been done to the concessionaire which is Mainstream Energy, the current operators of Kainji and Jebba hydro power plants.”
He said the “present stage is the technical handover by the Chinese consultant that built Zungeru hydroelectric power to the concessionaire.”
“Testing of generation of power started yesterday (Thursday) and it will last for about one or two weeks,” insisting that the plant had the capacity of evacuating power to the national grid.
Information minister’s remarks
Also speaking, the Minister of Information and Orientation, Mohammed Idris, said despite the upward review of electricity tariff, the government “still subsidises power by 85 per cent.”
Idris said the review was a strategic step toward a more sustainable, efficient and equitable electricity sector for the country.
He said, “A few days ago, the federal government unveiled a progressive policy in the power sector, which aims to boost sufficiency in power supply for all Nigerians.
“The most important aspect of the policy is that the Tinubu administration is sustaining electricity subsidy to 85 per cent of Nigerian consumers, which re-justifies its credential as a Pro-People democratic government while effecting electricity tariff increment to only 15 per cent of the electricity consumer population.
“Misconceptions and concerns around the tariff review are understandable. However, let me re-assure every Nigerian that this review is a strategic step toward a more sustainable, efficient, and equitable electricity sector. It lays the groundwork for significant improvements in service delivery, infrastructure development, and economic prosperity.
“Our focus must, therefore, remain steadfast on ensuring that the electricity sector’s transformation benefits all Nigerians, supports our industries, and propels our nation towards its bright future.”
The minister also listed other steps taken by the current administration to improve the power sector to include the recent signing into law the Electricity Act (Amendment) Bill, 2024, by President Bola Tinubu.
He said the new law would further strengthen the governance structure in the Power Sector and mandates the GenCos to set aside five per cent of their actual annual operating expenditure from the preceding year for the development of the host communities.
The Act, according to him, will also remove electricity from the Exclusive List to empower state governments to generate and distribute electricity to residents.
Idris consequently assured Nigerians that the government would not shy away from engaging the general public on all its programmes and policies.
“Let me restate our commitment to transparency in public communication as a deliberate policy to build trust between the government and its citizens. This is paramount because transparency plays a crucial role in fostering and reinforcing that trust.
“We understand that transparency is not just a principle to be upheld, but a foundation for good governance. Therefore, we are committed to ensuring that our communication channels remain open, accessible, and informative while we strive to provide accurate, timely, and relevant information to the public on matters of governance, policy, and programme.
“Since our last meeting with you, some salient achievements have taken place in our economy as we are all witnesses to the fact that through the implementation of some macroeconomic reforms, our foreign exchange market has stabilised and our beloved Naira is getting stronger daily.
“The recent establishment of the Presidential Economic Coordination Council and the Economic Management Team Emergency Task Force underscores Mr. President’s commitment to fostering a unified strategy for economic management that leverages the expertise and insights of key stakeholders from both the public and private sectors. These teams will serve as platforms for robust discussions, analysis, and decision-making to drive sustainable economic growth, job creation, and prosperity for all Nigerians.
“The launch of the Renewed Hope Infrastructure Development Fund (RHIDF) aims to raise about N20 trillion for investment in critical sectors such as the real sector of the economy, transport, social services, agriculture, and ICT among others.
“The Fund seeks to support projects that promote growth, enhance local value-addition, create employment opportunities, and promote exports.
“For emphasis, the projects to be targeted by the Fund include the construction of the Lagos-Calabar Coastal highway, which kick-started recently, the Sokoto-Badagry Expressway, Lagos-Kano Expressway, the Eastern Rail Lines and the modernisation of ports and aviation facilities across the country.
“To expand access to education as a potent weapon against poverty, the President has signed the Student Loans (Access to Higher Education) Act (Repeal and Re-Enactment) bill, 2015, into law. This groundbreaking initiative goes beyond mere legislation – it is a revolutionary approach to set up a permanent structure that would support the pursuit of education by our youths.”