Contradictory Moves: FG Continues Electricity Subsidy Payments Despite Tariff Hike, Adelabu Reveals

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The Minister of Power, Adebayo Adelabu, disclosed that the Federal Government continues to subsidize electricity despite the recent tariff increase for Band A customers.

Adelabu made this revelation during an interview on Channels Television’s Politics Today on Thursday.

He stated that the government is allocated approximately N1.8 trillion for electricity subsidy in 2024.

Adelabu further noted that the Electricity Act, 2023, stipulates provisions for bi-annual tariff reviews.

He said, “Review of tariff is actually legal once it is within the exclusive responsibility of the Nigerian Electricity Regulatory Commission (NERC). The Act actually provides for review twice in a year, every six months.”

“If we have been paying the tariff at the same level in the last two years, it logically means that someone has been paying the burden of all these increases.

“As it is today, looking at a total production, transmission and distribution cost, the Nigerian Government is bearing 67% percent of that cost before the increase in tariff for Band A customers.

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“But when you look at generation cost, the Nigerian Government is paying 90% but in terms of total subsidy, it is about 67% of subsidy on the tariff.

“Last year, it was about N720bn which was not fully funded, we have about N305bn carried into this year. If we retain tariff at the current level, the Nigerian Government will be needing about N2.9trn to subsidise electricity but with the increase for Band A customers, we are going to have a reduction of about N1.1trn. So, we are looking at about N1.8trn in subsidy,” he said.

On April 3, 2024, the Nigerian Electricity Regulatory Commission (NERC) announced an increase in electricity tariff for customers receiving 20 hours of power supply daily, categorized under Band A.

Under this adjustment, customers in this category will now pay N225 per kilowatt-hour, compared to the previous rate of N66 per kilowatt-hour.

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This move has faced heavy criticism from many Nigerians, particularly due to the timing of the tariff hike amidst prevailing economic challenges and hardship in the country.

But, Adelabu said, “The fact that the tariff for Band A, which is 15% of the total consumers will increase by over 200%, does not necessarily translate into 200% increase in their electricity bill if power is properly managed in terms of consumption.”

Adelabu assured Band A customers that they would receive value for their money under the new tariff structure. He also pledged that consumers in other bands would not be disadvantaged by distribution companies, as regulators would intervene if necessary.

The Minister emphasized that the government is now focusing on addressing inefficiencies within poorly managed distribution companies and is prepared to take decisive action in the interest of consumers.

He expressed optimism that by tackling inefficiencies and considering recent gains in the naira’s value against the dollar, electricity tariffs paid by Nigerians should see positive moderation in the near future.

“The tariff is flexible and I can tell you that even if naira gains more and the exchange rate comes down below N1,000, it must positively affect the tariff and the tariff even for the Band A will come to down below the N225 kilowatt per hour that we are currently charging,” he said.

The minister also disclosed that the government is actively engaged in increasing power generation capacity from approximately 4,000 megawatts to 6,000 megawatts within the next six months.

He highlighted that currently, 25% of Nigeria’s power generation is sourced from hydroelectric power, with the remaining 75% coming from gas plants.

The minister said “the gas that is supposed to be the raw material has not been coming in adequate proportion” but the government has been working with electricity generation companies to ramp up power generated for the benefit of Nigerians.

Adelabu revealed that the administration led by President Bola Tinubu intends to decentralize power generation across the states of the federation. This decentralization aims to enhance transmission and distribution infrastructure to facilitate Nigeria’s industrial transformation.

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