Electricity Subsidy Slashed to N1 Trillion Amid Tariff Reforms, Says Power Minister

 

Abuja, June 11, 2024 — The Federal Government of Nigeria has significantly reduced its electricity subsidy burden from N3 trillion to N1 trillion through the introduction of a higher tariff for Band A consumers, according to Minister of Power, Mr. Adebayo Adelabu. This announcement was made during a public hearing on electricity tariffs organized by the House of Representatives Joint Committee on Power, Commerce, National Planning, and Delegated Legislation in Abuja on Tuesday.

Minister Adelabu emphasized that the government could not sustain the N3 trillion subsidy, which necessitated the introduction of higher tariffs. “Without an increase in electricity tariffs, the expected subsidy would have been close to N3 trillion,” he said, highlighting that the new model requires Band A consumers to bear the cost, thus easing the financial load on the government.

He noted that even with the increased tariffs, electricity from the national grid remains cheaper than alternative sources such as fuel and diesel, which businesses and consumers often resort to due to power shortages. “We are still about the cheapest, even in sub-Saharan Africa, in spite of the tariff. Our neighboring countries pay higher. So the price isn’t comparable,” Adelabu added.

Adelabu reassured that the tariff hike is aimed at promoting industrial development and making life more affordable in the long run. “Band A is cheaper compared to other sources of generating power. It is almost 50 percent cheaper to connect to Band A of the national grid than to run on fuel and diesel,” he explained.

However, the move has sparked significant public outcry. Deputy Speaker of the House of Representatives, Rep. Benjamin Kalu, acknowledged the widespread discontent and economic concerns voiced by citizens. “The decision by the Nigeria Electricity Regulatory Commission (NERC) to increase electricity tariffs has sparked widespread discontent,” he said. “There are genuine concerns that higher utility bills resulting from this tariff hike can have ripple effects on operational costs for businesses, potentially leading to increased prices of goods and services.”

Kalu assured that lawmakers are committed to collaborating with the executive branch to reform the power sector, emphasizing the importance of efficiency and sustainability. “We are dedicated to providing legislative support to the efforts of the Tinubu administration in reforming the power sector by addressing all legal and legislative impediments,” he stated.

The public hearing underscored the complex balancing act the government faces in managing the financial viability of the power sector while addressing the economic impact on citizens and businesses.