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From Isaac Anumihe, Abuja
Minister of Power, Dr Adebayo Adelabu yesterday said the Federal Government has spent about N2.9trillion on electricity subsidy.
He said the government is still subsidizing 85 per cent of electricity supply in Nigeria despite increase in tariff for Band A customers. He said the government remains pro-poor in its power policy because it is subsidizing nothing less than 67% of the cost of producing, transmitting, and distributing electricity in Nigeria. He said the government is not ready to aggravate the sufferings by refusing to adopt 100% withdrawal of subsidy on electricity,
Adelabu spoke at the Fourth Ministerial Briefing in Abuja with the Minister of Information and National Orientation, Mr. Mohammed Idris.
He said: “Two things and lessons we must achieve. Number one is achieving operational sustainability of operators on cost recovery. 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. 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.
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. 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.
In his address, the Minister of Information and National Orientation, Mohammed Idris said the tariff review would lead to a better electricity sector. He said: “Misconceptions and concerns around the tariff review are understandable. However, let me reassure every Nigerian that this review is a strategic step toward a more sustainable, efficient, and equitable electricity sector,” he said.
