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The Minister of Power, Dr. Adebayo Adelabu, Friday said the Federal Government has spent about N2.9trillion on electricity subsidy.
He said the government is still subsidizing 85 per cent of electricity supply in the country despite increase in tariff for Band A customers.
Adelabu, who spoke at the Fourth Ministerial Briefing in Abuja, alongside the Minister of Information and National Orientation, Mr. Mohammed Idris, said the government remains pro-poor in its power policy because it is subsidizing nothing less than 67% of the cost of producing, transmitting, and distributing electricity in Nigeria.
According to him, the government is not ready to aggravate the sufferings by refusing to adopt 100% withdrawal of subsidy on electricity,
He said: “Two things and lessons we must achieve. Number one is achieving operational sustainability of operators on cost recovery. Anybody that goes into any business, the first intention is to recover cost, then if possible make some profit.
“The moment you cannot cover your cost, the sustainability of such business is doubtful. It will be run aground. But this cost recovery can either be through commercial pricing or a subsidized pricing. Commercial pricing is when the entire cost of producing power is transferred 100% plus the profit to the consumers of power.
“ Subsidized pricing regime is when the consumers are not allowed to pay the full cost of production. And government has pledged to pay a portion of this on their behalf. That is the regime that we are in Nigeria.
“ We are in a subsidy pricing regime, whereby government provides a large portion of the cost of producing, of transmitting, and of distributing power.
“And I must tell you that as at today, before the introduction of the tariff increase, government is subsidizing nothing less than 67% of the cost of producing, transmitting, and distributing electricity in Nigeria.
“At the current exchange rate this is going to translate into N2.9trillion for 2024. This is more than 10% of the national budget.
“Power sector is just a single sector out so many Sectors that government has to attend to. We have the works, we have housing, we have education, we have health, we have defence and so on and so forth that are all competing for this merge revenue from the government.
“So, it will be very insensitive on our part to compel government to continue to subsidize at that rate of almost N3 trillion for the power sector alone. We just have to be realistic and considerate.”
Adelabu insisted that only 15 % customers were affected by the increase in tariff for those in Band A Category.
He said the tariff review has favoured about 85 per cent of electricity customers in the country.
He said: “Electricity is no longer cheap for Band A. But this policy is pro -poor. It is pro-poor. The high- end people, they are the ones that are enjoying the subsidy more than others because they consume more.
“This is because what they are enjoying is more than what the poor are enjoying. We are saying no, let them pay the right price, and let the poor breathe too.
Adelabu said although the subsidized pricing regime was in transition to a full cost reflective tariff, the government will continue to protect the poor.
The Minister said: “This tariff review is in conformity with our policy thrust of maintaining a subsidized pricing regime in the short run or the short term with a transition plan to achieve a full cost reflective tariff for over a period of, let us say three years.
“I have mentioned it in a couple of media briefings that it is because of government sensitivity to the pains of our people that we will not make us migrate fully into a cost reflective tariff or to remove subsidy 100 percent in the power sector like it was done in oil and gas sector.
“We are not ready to aggravate the suffering of Nigerians any longer which is why we said it must be a journey rather than a destination and the journey starts from now on, that we should do a gradual migration from the subsidy regime to a full cost reflective regime and we must start with some customers.
In his address, the Minister of Information and National Orientation, Mohammed Idris said the tariff review would lead to a better electricity sector.
He said: “Misconceptions and concerns around the tariff review are understandable. However, let me reassure every Nigerian that this review is a strategic step toward a more sustainable, efficient, and equitable electricity sector.
“ It lays the groundwork for significant improvements in service delivery, infrastructure development, and economic prosperity. Our focus must therefore remain steadfast on ensuring that the electricity sector’s transformation benefits all Nigerians, supports our industries, and propels our nation towards its bright future.
“You would also recall that the President Bola Ahmed Tinubu signed the Electricity Act (Amendment) Bill, 2024 into law to further strengthen the governance structure in the Power Sector and mandates the GENCOs to set aside 5% of their actual annual operating expenditure from the preceding year for the development of the host communities.
“The Act also removed Electricity from the Exclusive list to empower state government to generate and distribute electricity to residents.”
