Barely two days after the Nigerian Electricity Regulatory Commission (NERC) sanctioned the escalation of electricity tariffs for customers categorized under the Band A classification, the Federal Government has indicated its intention to implement a similar measure for other classifications.
Addressing reporters at a briefing in Abuja on Friday, the Minister of Power, Adebayo Adelabu, revealed that the recent tariff hike is an initial step in the nation’s gradual elimination of electricity subsidies.
He further stated that the government aims to abolish all subsidies within the sector, fostering an environment conducive to increased investment in the power industry.
The Minister said: “This tariff review conforms 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 throughout, let us say three years.
“I have mentioned 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 remove subsidy 100 percent in the power sector like it was done in the oil and gas sector.”
READ ALSO: Electricity Tariff Hike: AEDC to Pay N200m Fine for Overcharging Customers
“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 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 subsidizing 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 it’s of funds we have.”