President Bola Tinubu shelves plan to increase electricity tariff and instead proposed nationwide power consumption subsidies, revealed Adebayo Adelabu, the Minister of Power.
Adelabu announced the government’s intent to scrutinise the five-year licence extension granted to privatised power distribution and generation companies, which would have expired on October 31, 2023.
Speaking at a press conference held in Abuja on Wednesday, the minister used the opportunity to read out the riot act, promising to dismiss any underperforming chief executives within the ministry.
He said, “The power sector is an industry that is very sensitive to any leader. You cannot jump overnight and implement the cost-reflective tariff. I can tell you that, until today the government still subsidises power. The tariff should have been raised months back, but Mr President said until we are able to achieve regular and incremental power supply we can’t touch the tariff.
“So there is a gap between the cost-reflective tariff that we are supposed to charge and the allowed tariff. That huge gap the government is still handling as subsidy. This affects liquidity in the system, investments and causes so many constraints.”
He noted that the absence of implementation had sparked a liquidity crisis in the sector. However, he emphasized that the President had rejected any increase in electricity rates.
“Now, I never said that it is not yet time to charge a cost-reflective tariff. Rather, I said cost reflective tariff is supposed to have been implemented months ago because it is the source of liquidity to the system.
“But for political reasons and empathy, you cannot cause additional burden on Nigerians. We just had the removal of fuel subsidy, we are talking about the exchange rate skyrocketing, galloping inflation and so many others that bring hardship to the people.
“And Mr President is trying to relieve this hardship through various forms of palliatives. So it is not politically expedient and reasonable to now implement a tariff that is more like dumping the existing tariff.
“We are now paying about N70 (per kilowatt-hour), and it can never be less than N130 or N140 at the exchange rate of today if we are to implement a cost-reflective tariff. Because part of the reasons for an increased tariff is the price of gas, which is paid in dollars,” Adelabu explained.
He clarified that currently, 75 to 80 percent of Nigeria’s power is sourced from gas power plants, and their primary input is gas. Consequently, when the exchange rate rises, the cost of gas also increases, impacting the tariff.
Furthermore, he emphasised that any adjustments to the tariff would occur after extensive public awareness campaigns and when a consistent and incremental power supply is guaranteed.
