Power Supply: N2.9tr spent on subsidy, FG still protects 85% customers, says minister

• CSO kicks, threatens to mobilise protest against
• NERC orders AEDC to reimburse customers over arbitrary billing

The Minister of Power, Dr. Adebayo Adelabu yesterday, said the Federal Government has spent about N2.9 trillion on electricity subsidy. He said the government is still subsidising 85 per cent of electricity supply in the country despite an increase in tariff for Band A customers.

He said the government remains pro-poor in its power policy because it is subsidising nothing less than 67 per cent of the cost of producing, transmitting and distributing electricity in Nigeria.

According to him, the government is not ready to aggravate the sufferings of Nigerians by refusing to adopt 100 per cent withdrawal of subsidy on electricity.

Adelabu spoke at the Fourth Ministerial Briefing in Abuja with the Minister of Information and National Orientation, Mr. Mohammed Idris.

His words: “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 subsidised pricing. Commercial pricing is when the entire cost of producing power is transferred 100 per cent plus the profit to the consumers of power.

“Subsidised 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 of today, before the introduction of the tariff increase, government is subsidising nothing less than 67 per cent of the cost of producing, transmitting, and distributing electricity in Nigeria.

“At the current exchange rate, this is going to translate into N2.9 trillion for 2024. This is more than 10 per cent of the national budget.

“Power sector is just a single sector out of 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 meagre revenue from the government.

“So, it will be very insensitive on our part to compel government to continue to subsidise 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 per cent of 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 added: “Electricity is no longer cheap for Band A. But this policy is pro-poor. It is pro-poor. The high-end people 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 subsidised pricing regime was in transition to a full cost reflective tariff, the government would continue to protect the poor.
“This tariff review is in conformity with our policy thrust of maintaining a subsidised 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 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 per cent in the power sector like it was done in the 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.”

However, a civil society organisation, ActionAid Nigeria, yesterday said it was  ready to mobilise a massive protest against the government over the “unjust increment.”

The group said it has the mandate of over five million members in the social justice movement circle to demand its reversal.    “We are fully prepared to mobilise our platforms to drive our demands, and we will not hesitate to escalate our efforts, albeit peacefully if our concerns are not addressed,’’ the group said.

“The Country Director of the group, Andrew Mamedu,  in a statement, noted: “The increment for customers under Band A is not only unjustifiable but also insensitive to the plight of ordinary Nigerians and businesses within the band, especially SMEs. It is outrageous that amidst the prevailing power crisis, the commission would choose to burden consumers with exorbitant tariffs, further deepening the economic hardship faced by millions of households.

“We view the increase as unjustified and a reward for the gross incompetence of the players in the power sector who have subjected Nigerians to more darkness in recent months than at any other time in history.
“Customers under Band A, who are supposedly entitled to 20 hours of electricity supply daily, are left in the dark both figuratively and literally as power outages continue to plague the nation.

“NERC’s decision to downgrade certain customers from Band A to Band B due to purported non-compliance with the stipulated hours of electricity provision by distribution companies, without an inherent plan for monitoring the DisCos and holding them accountable for fulfilling their obligations, is absurd.”
Meanwhile, the Nigerian Electricity Regulatory Commission (NERC) yesterday fined Abuja Electricity Distribution Company (AEDC) N2000 million and asked the DisCo to immediately reimburse all customers in band B to E wrongly billed over the recent increase in electricity tariff.

NERC had Wednesday increased end-user tariff by 240 per cent from about N70 per Kilowatt per hour (KhW) to N225 kilowatt per hour, insisting that the increase only affected band A, which is about two million of electricity customers or 15 per cent, which consumed 40 per cent energy in the country.

Instead of smoothly implementing the supplementary tariff increment, AEDC went overboard and increased the tariff for most bands.

Although the utility company admitted the error, blaming it on system glitches, NERC in a new order asked the DisCo to refund all the affected customers and show proof before April 12.

NERC noted that the reimbursement must be done through the provision of the balance of customer tokens that the affected customers would be entitled to receive at the applicable rates and all token reimbursements shall be issued to the affected customers by April 11, 2024.