The Federal Government plans to triple energy prices in the coming weeks in a bid to revitalise the country’s energy sector and cut the about $2.3 billion spent on subsidy annually.
However, according to findings,
the planned tariff increase is being talked about in hush tones, and the regulator, Nigerian Electricity Regulatory Commission (NERC), a government-controlled body, is yet to make any statement on the rumours.
“The regulator will make any pronouncements based on its discussion with the distribution and generating companies. The presidency cannot say anything at this stage”, spokesman for the presidency, Bayo Onanuga, said, when asked by Bloomberg, adding that the “electricity sector is hurting”.
However, power companies are to be allowed to raise prices to N200 ($0.15) per kilowatt-hour from N68 for urban consumers this month, according to sources, who asked not to be identified because they aren’t authorised to speak on the matter.
These customers represent 15 percent of the population that the Government says consume 40 percent of the nation’s electricity, the people said.
Nigeria’s economy has been hobbled by the lack of power supply while an increasing subsidy burden has weighed on government finances, diverting capital from building roads and spending on health care.
With the latest move, President Bola Tinubu wants to cut down on price distortions, which haven’t ended despite breaking the State-owned power firm into 11 distribution companies, (DisCos) and six generation firms, and selling them to investors.
The move to raise the tariff follows pressure from Nigeria’s debt-burdened electricity DisCos that want to charge a cost-reflective price to improve their finances, the sources said.
While the country privatised generation and distribution in 2013, tariffs are set by the regulator, NERC. Power firms aren’t allowed to charge enough to recover the cost of distributing electricity, with the government paying the difference as a subsidy to companies in the sector.
The Government has in the past said that electricity companies are short of an estimated 2 trillion naira in capital and need new investors to revive the industry.
The move will also help reduce government spending, as it will now only subsidize the poor in rural areas. The intervention gulped around 120 billion naira monthly, before authorities devalued the currency at the end of January.
Last month, the International Monetary Fund warned that the capping of fuel pump prices and electricity tariffs below cost recovery could have a fiscal cost of as much as 3 percent of Nigeria’s Gross Domestic Product, (GDP), in 2024.
