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Presidency Deems Current Electricity Tariff Unfeasible

Federal Government Plans to End Electricity Subsidy for 15% of Consumers

The Federal Government has unveiled intentions to eliminate electricity subsidies for 15% of consumers, aiming to trim its hefty N3.3 trillion expenditure and save approximately N1.1 trillion annually. This announcement was made by Bayo Onanuga, the President’s Special Adviser on Information and Strategy, to Reuters on Tuesday. Onanuga indicated that the administration, led by Bola Tinubu, is inclined to permit a surge in electricity prices, given the allocated N450 billion budget for energy subsidies in 2024.

Consequently, power distribution companies will be authorized to hike prices from N68 to N200 per kilowatt-hour for urban consumers starting in April, as explained by the presidential aide in an interview with Bloomberg. Onanuga stressed that the last review of electricity tariffs in Nigeria was conducted in 2020 and emphasized that the proposed increase would facilitate cost recovery for distribution companies and enhance investment opportunities. “With the burden of significant subsidies and the escalating cost of gas, the current electricity tariff is untenable,” he reiterated to Reuters.

Confirming these developments to media correspondents, Onanuga noted that the tariff adjustment would only impact 15% of consumers, constituting 40% of electricity consumption. Furthermore, he disclosed that the Federal Government would assist power generating companies in offsetting debts totaling about N1.5 trillion owed to the country’s bulk electricity purchaser.

A recent electricity report released by the National Bureau of Statistics highlighted a surge in revenues for electricity distribution companies, reaching N1.1 trillion in 2023 despite persistent power supply challenges nationwide. This marks a notable increase of N234.4 billion or 28.2% from the previous year’s revenue of N831 billion. However, Nigeria’s national power grid suffered 46 collapses from 2017 to 2023, according to a report by the International Energy Agency, with 2023 witnessing heightened nationwide blackouts, particularly on September 14 due to a transmission line fire.

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Analysis of the revenue data revealed notable revenue increases for various electricity distribution companies, including Ikeja, Eko, Abuja, Ibadan, Enugu, Yola, Benin, Kaduna, Jos, Kano, and Port-Harcourt. This heightened efficiency in revenue collection may be linked to an uptick in overbilling, particularly for customers on estimated billing systems. Additionally, observations by The PUNCH suggest that distribution companies have been successful in capturing more customers under the estimated billing regime. Further analysis indicated a 9.38% increase in metered customers and a slight 1.73% reduction in customers under estimated billing, totaling 5.8 million.

Federal Government Plans to End Electricity Subsidy for 15% of Consumers

The Federal Government has unveiled intentions to eliminate electricity subsidies for 15% of consumers, aiming to trim its hefty N3.3 trillion expenditure and save approximately N1.1 trillion annually. This announcement was made by Bayo Onanuga, the President’s Special Adviser on Information and Strategy, to Reuters on Tuesday. Onanuga indicated that the administration, led by Bola Tinubu, is inclined to permit a surge in electricity prices, given the allocated N450 billion budget for energy subsidies in 2024.

Consequently, power distribution companies will be authorized to hike prices from N68 to N200 per kilowatt-hour for urban consumers starting in April, as explained by the presidential aide in an interview with Bloomberg. Onanuga stressed that the last review of electricity tariffs in Nigeria was conducted in 2020 and emphasized that the proposed increase would facilitate cost recovery for distribution companies and enhance investment opportunities. “With the burden of significant subsidies and the escalating cost of gas, the current electricity tariff is untenable,” he reiterated to Reuters.

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Confirming these developments to media correspondents, Onanuga noted that the tariff adjustment would only impact 15% of consumers, constituting 40% of electricity consumption. Furthermore, he disclosed that the Federal Government would assist power generating companies in offsetting debts totaling about N1.5 trillion owed to the country’s bulk electricity purchaser.

A recent electricity report released by the National Bureau of Statistics highlighted a surge in revenues for electricity distribution companies, reaching N1.1 trillion in 2023 despite persistent power supply challenges nationwide. This marks a notable increase of N234.4 billion or 28.2% from the previous year’s revenue of N831 billion. However, Nigeria’s national power grid suffered 46 collapses from 2017 to 2023, according to a report by the International Energy Agency, with 2023 witnessing heightened nationwide blackouts, particularly on September 14 due to a transmission line fire.

Analysis of the revenue data revealed notable revenue increases for various electricity distribution companies, including Ikeja, Eko, Abuja, Ibadan, Enugu, Yola, Benin, Kaduna, Jos, Kano, and Port-Harcourt. This heightened efficiency in revenue collection may be linked to an uptick in overbilling, particularly for customers on estimated billing systems. Additionally, observations by The PUNCH suggest that distribution companies have been successful in capturing more customers under the estimated billing regime. Further analysis indicated a 9.38% increase in metered customers and a slight 1.73% reduction in customers under estimated billing, totaling 5.8 million.

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