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From Isaac Anumihe, Abuja
After considering the fact that the government would have spent over N2.9 trillion in subsidising electricity between January and March this year, the government has come up with a decision to phase out subsidy in 2027.
The government lamented that at the current exchange rate regime, Nigeria would have been spending about N2.9 trillion, in three months which is over 10 per cent of the national budget.
Speaking during a press briefing in Abuja to explain the reason for increasing electricity tariff to N225/kilowatts from the previous N66/ kilowatts, Minister of Power, Chief Adebayo Adelabu said that electricity subsidy is not sustainable because it’s taking a large chunk of the national budget
He said that it’s no longer
sustainable when there are other contending needs in other sectors also begging for attention. He said it would be insensitive to insist that the government should continue the full subsidy regime considering its lean resource
According to him, the removal of subsidy would improve local investment in the sector and attract foreign investors.
For him, the present situation in the sector is discouraging banks from lending and the current situation is not encouraging the operators to replace dilapidated equipment.
Adelabu noted that the increase affected only about 1.5 million (15 per cent) of electricity customers in Nigeria, out of the total 12 million of them.
The N225/kilowatts, he said, is still more than 50 per cent cheaper than alternative sources of power.
He noted that liquidity and pricing has been a major issue in the sector. The right pricing, he explained, will engender competition in the industry and attract more investment in the sector.
The tariff review, he stated, is in conformity with the government policy thrust of maintaining a subsidised 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 three years.
“I have mentioned it a couple of times that it is because of government’s sensitivity to the pains of our people that stopped us from migrating fully into a cost reflective tariff or to remove subsidy 100 per cent in the power sector that was done in oil and gas sector.” he said
“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. 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 to enjoy 20 hours of light to be the ones to add.
