N3.2tn electricity subsidy needed – NERC gives reason for tariff hike

The Nigerian Electricity Regulatory Commission, NERC, says the federal government needs to provide N3.2 trillion in subsidies in 2024 to reverse the recent electricity tariff hike.

The Nigeria Electricity Regulatory Commission Chairman, Sanusi Garba, said this in Abuja during a Thursday meeting with the House of Representatives Committee on Power.

Recall that on April 3, 2024, NERC announced an almost 245 per cent electricity tariff hike for Band A customers, getting 20 power supplies.

However, the tariff hike received condemnation among Nigerians, organized private sector groups, the Nigeria Labour Congress, the Trade Union Congress, and other organizations.

However, at the Committee on Power, Garba said the tariff hike was needed to boost current investment in the sector and improve power supply.

He added that if a total sectoral overhauling was not carried out, including fluctuation in foreign exchange, power supply in Nigeria would continue to pose a challenge.

He explained that before the recent review in tariff, distribution companies were only obligated to pay 10 per cent of their energy invoice, adding that the lack of cash backing was creating a liquidity challenge in the sector.

He further explained that between January 2020 and January 2023, the electricity tariff increased from 55 per cent to 94 per cent, adding that “the unification of FX and current inflationary pressures are pushing cost reflective tariff to N184 kilowatt per hour.”

He said, “If sitting back and doing nothing is the way to go, it would mean that the National Assembly and the Executive would have to provide about N3.2 trillion to pay for subsidy in 2024.”

Garba also said that only N185 billion of the N645 billion subsidy in 2023 has been cash-backed, leaving a funding gap of N459.5 billion.

“The committee cannot take any decision to stop the increase in tariff. That decision can only be taken by the entire House and not at the committee level. There must be a House resolution to stop it,” he said.

On his part, the Chairman of the Committee, Victor Nwokolo (PDP, Delta), said the essence of the meeting was to address the recent increase in tariff and the various bands to which electricity consumers were recently categorized.

The lawmaker said the officials of NERC and Discos had given the committee helpful information, noting that “we have not concluded with them because the transmission company of Nigeria was not here and the generation companies too.

“We will hold further consultations with them by next week. But what they have said, which is true, is that without the change in tariff due in 2022, the industry lacks the capital to bring the needed change.

“Of course, with the population explosion in Nigeria, the areas being covered are beyond what they estimated in the past, and because they need to expand their network, they also need more money.’’

Meanwhile, since the tariff hike, power supply has worsened nationwide as Nigerians grapple with darkness daily.

N3.2tn electricity subsidy needed – NERC gives reason for tariff hike