FG insists on electricity subsidy amid tariff review

The Federal Government, on Monday, announced that it was currently reviewing the implementation process for a cost reflective electricity tariff, but stated that it would continue to subsidise power supply for vulnerable citizens in Nigeria.

It also announced that it would unbundle the Transmission Company of Nigeria by separating Transmission services from System and Market operations in the first quarter of this year.

The Minister of Power, Chief Adebayo Adelabu, who announced this in a statement issued by the Federal Ministry of Power in Abuja, further stated that in the medium to long-term, Nigeria’s power transmission grid would be separated into regional grids to enable effective management.

According to The Punch, power distribution companies denied reports of electricity tariff hike beginning from January 1, 2024, stressing that the Nigerian Electricity Regulatory Commission had not issued any directive for such.

Their denial was due to an earlier report that power distribution companies were planning to hike electricity tariff from January 1, 2024, a development that was neither confirmed by the NERC nor the Federal Ministry of Power.

But in the statement from the FMP on Monday, the minister was quoted to have stated that the process for the implementation of a cost reflective tariff was ongoing.

Power tariffs are normally reviewed every six months to reflect the economic realities across the country, considering inflation, cost of gas required to fire most power plants, among others.

In the statement, which focused on the new strategic direction of the FMP, Adelabu said, “Our primary focus is enhancing distribution and transmission infrastructure to minimise technical and commercial losses. The lack of liquidity continues to be a significant challenge in the electricity market.

“We are currently reviewing the implementation process of a cost reflective tariff, while government will continue to subsidise power supply to those that are vulnerable in our society.”

On December 18, 2023, The PUNCH reported that the Federal Government spent N375.8bn on electricity subsidy between January and September 2023, as power consumers paid a total of N782.6bn for the commodity during the same period, it was gathered on Sunday.

The power subsidy figures obtained in Abuja from the Nigerian Electricity Regulatory Commission, an agency of the Federal Government, showed that the government subsidised electricity in the first, second and third quarters of 2023.

The report stated that in the first quarter of this year, the Federal Government subsidised power by N36bn, this increased to N135.2bn in the second quarter, and jumped to N204.6bn in the third quarter. Figures for the fourth quarter are not ready yet.

Providing reasons for the subsidy in the third-quarter 2023 report, the NERC stated that it was due to the absence of cost-reflective tariffs.

It said, “In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff shortfall funding. This funding is applied to the NBET (Nigerian Bulk Electricity Trading Company) invoices that are to be paid by Discos.