The Minister of Power, Adebayo Adelabu, revealed on April 5th that the recent increase in electricity tariff for Band A customers was prompted by the acknowledgment that allocating nearly 10% of the national budget solely to subsidizing electricity was unsustainable.
Adelabu made this disclosure during a Ministerial Press Briefing organized by the Ministry of Information and National Orientation in Abuja. He emphasized that the sector has been lacking the necessary liquidity to ensure its sustainable operation, making it unattractive for investments.
The government, according to Adelabu, is currently subsidizing at least 67% of the cost of generating, transmitting, and distributing electricity. He noted that the decision to not completely remove the subsidy on electricity was made to prevent exacerbating the challenges faced by the majority of Nigerians.
The new tariff structure, Adelabu explained, is based on the operators’ capacity to provide a minimum of 20 hours of electricity supply per day. If the distribution companies (DisCos) fail to meet this requirement, customers will be downgraded to a lower band.
Under the new rate, the Nigerian Electricity Regulatory Commission (NERC) is mandated to ensure sanctions for defaulting operators. Adelabu stressed the importance of achieving operational sustainability for operators through cost recovery, whether through commercial pricing or a subsidized regime.
He emphasized the need for a gradual transition from the subsidized pricing regime to a fully cost-reflective tariff over a period of three years, with a commitment to protecting the interests of the poor during this transition. Adelabu assured that the policy is pro-poor and aims to ensure fairness in electricity pricing, ensuring that both high-end consumers and the less privileged pay their fair share.
