Tinubu stops electricity tariff hike, insists on subsidy

On Wednesday, Minister of Power Adebayo Adelabu disclosed that President Bola Tinubu has ordered a subsidy to be paid on all electricity used in the country, thereby halting a planned increase in electricity rates.

Since the privatised power distribution and generation businesses’ operational licences were set to expire on October 31, 2023, Adelabu said the Federal Government will look into whether or not the five-year licencing extension was lawful.

The minister, speaking at a press briefing in Abuja, went on to say that he would fire any underperforming agency head in the electricity ministry if it threatened his position.

Adelabu noted, “The power sector is an industry that is particularly sensitive to any leader” while discussing the proposal for a cost-reflective tariff that would result in an increase in the price of power.

The cost-reflective tariff cannot be implemented immediately. I can confirm that power is still subsidised by the government in the present day. The tariff should have been raised months ago, but Mr. President has declared that it will not be changed until reliable, incremental power is available.

Therefore, there is a discrepancy between the cost-reflective rate we are required to charge and the tariff we are really permitted to charge. The government continues to subsidise that enormous difference. This has far-reaching effects on system liquidity, investment opportunities, and other constraints.

He said the industry was experiencing a liquidity problem since this wasn’t being implemented, but that the President had vetoed any increase in electricity prices.

“Now, I never claimed that it was not yet time to levy a cost-reflecting rate. Instead, I argued that the system’s liquidity should have been established with the introduction of a cost-reflective rate several months ago.

However, you should not impose more hardship on the Nigerian people for political or compassionate motives. Just recently, gasoline subsidies were eliminated, and now we hear predictions of soaring currency rates, soaring inflation, and other woes for the people.

And Mr. President is making an effort to lessen the suffering these measures will cause. Therefore, it is neither politically feasible or acceptable to impose a tariff that is more akin to dumping the current tariff at this time.

To impose a cost-reflective tariff, our current rate of roughly N70 per kilowatt-hour would need to rise to at least N130 or N140 at today’s exchange rate. Because part of the reasons for an increased tariff is the price of gasoline, which is paid in dollars’, Adelabu noted.

He said that as of right now, 80% or more of Nigeria’s electricity comes from gas power plants, and that gas is the plants’ basic material. The cost of gasoline increases and has an impact on the tariff as the exchange rate rises.

He did note that the increase in tariff will occur at the proper moment, following extensive public education and outreach, and that there must also be an assured incremental and regular supply.

Minister Obaseki noted that efforts were being made to increase Nigeria’s power generation capacity from its current level of roughly 4,000 megawatts.

He emphasised that the President had instructed his ministers that they must perform or be sacked; therefore, any high-ranking individual in the ministry and its agencies who fails to deliver will have to leave.

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This is not about me; it’s about the country, and the country’s interests must win out. But before I depart, I will exhaust every option to make sure I deliver. Adelabu argued, “All the actors in the power sector must support my vision for me to support Mr President’s vision.

The minister insisted that commercialization would have been more effective than the 2013 privatisation of the power sector.

He did, however, point out that even with 40% ownership in the various corporations, the federal government could still seize control of the electricity distribution companies.

Since most Discos were responsible for such wide territories and were underperforming, he suggested that the government may conduct a review of their coverage.

After resuming his position as minister, the minister discovered that the privatised electricity companies’ licences had been extended for a further five years, from 2013 to 2023.

He added that the matter was being looked into and that government officials would meet with private sector operators to establish performance bond targets for the electricity companies.

This government did not extend the licences, but I can tell you that I have ordered a probe into the subject. This is why we’re looking into the situation further.

To what extent did the extension comply with the law and the contract? According to Adelabu,

The minister was asked if Nigeria had begun sending electricity to the Niger Republic, to which he replied, “We have not started.” We are only messengers; if they tell us to start it again, we will.

He assured reporters that the federal government was still keeping an eye on developments in the afflicted country.

According to statistics from the National Bureau of Statistics, the total number of electricity consumers in Q1 2022 was 10.63 million and 10.81 million in Q2 2022, suggesting a rise of 1.67 percent on a quarter-on-quarter basis.

In Q1 2022, client number dropped 1.36 percentage points from Q1 2021 (10.78 million), while in Q2 2022, customer number dropped 2.27 percentage points from Q2 2021 (11.06 million).

The number of clients using metres increased from 4.79 million in Q1 2022 to 4.96 million in Q2 2022, or 3.53 percent.

Electricity supply fell from the 6,172.19 (Gwh) reported in Q1 2021 to the 5,882.57 (Gwh) reported in Q2 2021. The DISCOs’ revenue was 204.74 billion in Q1 2022 and 188.41 billion in Q2 2022. This is a decrease of 7.97% over the previous quarter. From Q1 2021’s 183.74 billion to Q2 2021’s 185.24 billion, revenues increased by 11.42 percent and 1.71 percent, respectively.

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