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Economy

Nigeria Plans 300% Electricity Tariff Hike in Coming Weeks

By Adedapo Adesanya

The federal government is planning an almost 300 per cent increase in electricity tariffs in the coming weeks to attract investment into the sector.

As it is being planned, energy distribution companies in the country known as DisCos will begin to charge about N200 per kilowatt-hour (kWh) for customers in the urban areas as against the current N68 per kWh.

Those in urban centres represent just 15 per cent of the population but reportedly consume around 40 per cent of the country’s power.

The Special Adviser to the President on Information and Strategy, Mr Bayo Onanuga, said that the Nigerian Electricity Regulatory Commission (NERC) would announce a price increase soon and the government cannot speak on the matter for now.

Mr Onanuga said the government was under pressure to allow a price increase in the electricity sector as it only budgeted N450 billion for the subsidy this year.

Although he did not say when the tariff increase would come into effect, he said that when it does come in effect, the government is expected to save close to N1.1 trillion per year.

Mr Onanuga said Nigeria last reviewed electricity tariffs in 2020, adding the proposed increase would help businesses recover costs and boost investment.

“With the huge subsidy burden and high cost of gas … the current electricity tariff is not realistic,” he said.

Nigeria’s power sector faces a myriad of problems including a failing grid, gas shortages, high debt and vandalism. The country has 12,500 megawatts of installed capacity but produces only about a quarter of that, leaving many reliant on expensive diesel-powered generators.

This year alone, the national grip has collapsed twice and electricity scarcity has been attributed to gas unavailability, a situation the Minister of Power claims is under investigation.

Also, state-controlled power tariffs are too low to allow distribution companies to recoup costs and pay generating companies – leaving the sector with debts.

Speaking on this, Mr Onanuga said the government would consider helping generating companies to offset around N1.5 trillion debt owed to the Nigerian Bulk Electricity Trading Company.

Prior to now, the government has spent on N3 trillion on intervention to electricity distribution companies.

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