N3trn Electricity Subsidy No Longer Sustainable, Minister Tackles Nigerians Amidst Protests

Amidst protests from Nigerians the Minister of Power, Adebayo Adelabu has explained the increase in electricity tariff.

The federal government recently increased electricity tariff by over 300 percent, according to checks from the National Electricity Regulatory Commission, NERC.

The government said the increased only affects customers that enjoyed up to 20 hours electricity daily, saying customers who are allocated lower power are not affected.

The Northern Elders Council, NEC has condemned the act as reckless.

Speaking on Friday, the minister said the federal government could no longer afford the humungous subsidy on electricity, stressing that over N2 trillion is spent annually to subsidize electricity for Nigerians.

He explained that the increase did not target the poor, adding that 15 percent customers are only affected by the change.

Adelabu explained further that the government’s intension in hiking tariff is to ensure that investors do not only recover their cost of investment, but also make sizable profit.

He said, “Anybody that goes into any business, the first intention is to recover cost, then if possible make some profit.

“The moment you cannot cover your cost, the sustainability of such business is doubtful. It will be run aground.

“But this cost recovery can either be through commercial pricing or a subsidized pricing. Commercial pricing is when the entire cost of producing power is transferred 100% plus the profit to the consumers of power.

“Subsidized pricing regime is when the consumers are not allowed to pay the full cost of production and government has pledged to pay a portion of this on their behalf. That is the regime that we are in Nigeria.

“We are in a subsidy pricing regime, whereby government provides a large portion of the cost of producing, of transmitting, and of distributing power.

According to him, before the current increase the government has was subsidizing electricity to the tune of 67 percent per cent, which he stated represents over 10 percent of the annual budget.

He said: “And I must tell you that 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 in Nigeria.

“At the current exchange rate this is going to translate into 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 that government has to attend to. We have works, we have housing, we have education, we have health, we have defence and so on and so forth that are all competing for this meager revenue from the government.

“So, it will be very insensitive on our part to compel 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.”