Nigeria Halts Increase In Electricity Tariffs; Power Consumption Subsidies To Continue

The federal government has halted a hike in electricity tariffs and decided to continue power consumption subsidies across the nation.

Nigeria's Power Minister Adebayo Adelabu said President Bola Ahmed Tinubu's administration will also begin an investigation into private power distribution and generation companies that received a five-year license extension, which expired on Oct. 31.

At a press briefing in Abuja on Wednesday, the minister said the power sector is a "very sensitive" industry for any leader and that the government can't "jump overnight and implement the cost reflective tariff," Punch reported.

"I can tell you that till today the government still subsidizes power. 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," Adelabu said. "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 it as a subsidy. This affects liquidity in the system, investments and causes so many constraints."

He noted that the decision to not increase electricity rates could cause a liquidity crisis in the power ministry.

"Now, I never said that it is not yet time to charge 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," the minister added.

He acknowledged the fuel subsidy removal has caused an increase in the exchange rate, inflation, and many other difficulties for people.

"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," he explained.

Nigerians currently pay around N70 per kilowatt-hour but it should be N130 or N140, considering the exchange rate, he said, adding that part of the "reasons for an increased tariff is the price of gas, which is paid in dollars."

Adelabu noted the tariff will eventually increase but only after communicating it with the citizens. He also promised to ensure there is a regular power supply.

He pointed out that 4,000 megawatts of power generation in Nigeria is not acceptable, warning senior officials and agencies to increase it or face stern action.