The Minister of Power, Adebayo Adelabu, has said that prior to the introduction of the upwardly revised electricity tariff the federal was subsidizing about 67% of the power sector, which was expected to amount to N2.9 trillion by the end of 2024.
Adelabu said this during an inter-ministerial briefing in Abuja on Friday.
The Minister pointed out that Nigeria is presently utilizing a subsidy pricing model in the power sector, with the federal government heavily subsidizing the production costs of power.
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According to him, the subsidy on the power sector would have been around 10% of the total 2024 budget without the increase in electricity tariff.
- “We are in a subsidy pricing regime whereby government provides a large portion of the cost of producing, transmitting and disturbing power in the country.
- “And I must tell you, as at today before the introduction of the tariff increase, government is subsidizing nothing less than 67% of the cost of producing, transmitting and distributing electricity supply in Nigeria.
- “At the current exchange rate, this is going to translate to N2.9 trillion for 2024. This is more than 10% of the national budget.
- “Power sector is just a single sector out of so many sectors the government has to attend to. All these sectors are all competing from this meagre revenue from the government.
- “So it will be insensitive on our part to force on government to continue to subsidize at that rate of almost N3 trillion to the power sector alone. We just have to be realistic,” Adelabu said.
Backstory
Nairametrics earlier reported that the Nigerian Electricity Regulatory Commission, NERC, stated that the newly approved electricity tariff is anticipated to cut down the subsidy for the fiscal year 2024 by approximately N1.14 trillion.
This came on the heel of the recent increase in electricity tariff by the Commission from N66/kWh to N225 for customers classified under the Band A category.
According to NERC, the tariff was introduced after the commission undertook a detailed assessment of the tariff proposals submitted by the 11 Electricity Distribution Companies (DisCos), adhering to its established regulations and business rules.
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Vice Chairman of NERC Musliu Oseni further stated that only 15% of the total consumers of electricity in the country will be affected under the new tariff model.
- “The order takes effect from today and in that order the commission has approved a rate review of N225 per killowatt hour for just under 15% of the customer population in NESI.
- “That means that less than 15% of the customers will be affected,” Oseni said.
