The Federal Government has announced intentions to stop subsidizing electricity for 15% of consumers, aiming to reduce its yearly expenses by about N1.1 trillion.
According to Bayo Onanuga, the President’s Special Adviser on Information and Strategy, this move is part of efforts to cut down the government’s N3.3 trillion electricity subsidy bill.
Onanuga explained that the administration, led by Bola Tinubu, plans to implement this change due to its N450 billion budget for energy subsidies in 2024. As a result, urban consumers may see an increase in electricity prices from N68 to N200 per kilowatt-hour starting in April.
This adjustment, which affects only a fraction of consumers, aims to help power distribution companies cover their costs and make necessary investments.
Onanuga highlighted that the current electricity tariff, set in 2020, does not reflect the true expenses, especially considering the high cost of gas and the substantial subsidy burden.
Additionally, the government intends to assist power generating companies in settling approximately N1.5 trillion in debts owed to the country’s bulk electricity buyer. Despite these changes, a recent report by the National Bureau of Statistics revealed a surge in electricity distribution companies’ revenues to N1.1 trillion in 2023, up by 28.2% from the previous year.
This growth in revenue comes amid persistent challenges with power supply, with Nigeria’s national power grid experiencing 46 collapses between 2017 and 2023, according to the International Energy Agency.
The increase in revenue may partly stem from enhanced efficiency in revenue collection, possibly linked to a rise in overbilling, particularly for customers on estimated billing. Discos have been observed to enroll more customers under the estimated billing system, while the number of metered customers has seen a slight decrease.