We Are Yet To Fully Remove Subsidy On ELECTRICITY — FG
FG states following a rate increase from N66 to N225 per kilowatt that they have not yet completely eliminated the electricity subsidy.
The Federal Government, through the Ministry of Power, has hinted that a similar approach might be extended to others, just 48 hours after the Nigerian Electricity Regulatory Commission, or NERC, authorized the hike in electricity tariff for users under the Band A classification.
Adebayo Adelabu, the Minister of Power, stated on Friday, April 5, that the country's recent electricity tariff increase is a trial run for the eventual elimination of electricity subsidies.
He says that in order to encourage investment in the power sector, the government intends to eliminate all subsidies in the industry.
The Minister declared: “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.”
Adelabu continued, “Compared to the N500 they pay for alternative energy like diesel and others, the N225 kilowatt per hour Band A customers are charged as little.”
The minister stated that the government used to subsidize 67% of the cost of power, but this was before the country entered a pricing system known as subsidy pricing, in which it pays for a significant amount of the costs associated with generation, transmission, and distribution.
“The government would have paid N2.9 trillion 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.”
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