FG tackles mounting electricity debt, hikes tariff for Band A

Despite the hues and cries of Nigerians who are still battling with the aftermath of the petrol subsidy removal, the Federal Government last week removed the subsidy on electricity being consumed by customers on Band A feeders in a bid to tackle its mounting debt in the sector, writes DARE OLAWIN

A few months after he assumed office as the Minister of Power, Adebayo Adelabu made known his intention to remove the subsidy on electricity, saying the Federal Government could no longer shoulder the responsibility. As gathered, the Federal Government was set to remove the subsidy in January, but President Bola Tinubu was said to have delayed the process.

As it happened with the petrol subsidy, the government and major players in the power sector agreed that customers be allowed to pay for the electricity they consume. While those in the government clamoured for an end to the electricity subsidy regime because, according to them, it was no longer sustainable, investors in the supply chain want a fully deregulated power sector, saying lack of liquidity was ‘killing’ the industry.

Initially, Tinubu had refused to grant the request, despite the pressure being mounted on him, The President was aware that the Nigerian economy ran into a problem after he removed the fuel subsidy upon assumption of office. This, coupled with his policy to float the naira, has made feeding difficult for many Nigerians as prices of commodities continued to skyrocket.

Our correspondent learnt that the stakeholders had succeeded in convincing Adelabu that the only way to have an effective power sector was to allow liquidity through cost-reflective tariffs, which could only be achieved if the government removed the subsidy and allowed customers to pay for their consumption.

Adelabu had, on many occasions, stressed that the government could no longer sustain the payment of the subsidy on electricity. In January, the Nigerian Electricity Regulatory Commission released the 2024 electricity tariffs, which showed that the Federal Government was to shoulder about N1.6tn subsidy for the year, to avert a hike in tariff.

Instead of customers paying N122/kWh in some areas, the NERC allowed the distribution company to charge N56/kWh, leaving the remaining for the government to bear as a subsidy. Adelabu said this was “very difficult to sustain” because the country’s power debt had continued to soar.

The minister stated that only N450bn was appropriated for electricity subsidy in the 2024 budget, but findings by the NERC showed that subsidy would gulp about N2.9tn this year. He revealed that the country was currently indebted to the tune of N1.3tn to electricity generating companies, while the debt to gas companies was $1.3bn.

On February 21, the Senate passed a resolution kicking against plans by the Ministry of Power to approve the proposed hikes in electricity tariffs. The Senate also rejected plans to remove the electricity subsidy, given the present hardship in the country. The Senate then called on the government to step down the idea of an increase in electricity tariffs. However, the Federal Government appeared to have ignored the resolution passed by the Senate with this recent action.

In an interview with The PUNCH, the Executive Director of Research and Advocacy of the Association of Nigerian Electricity Distributors, Sunday Oduntan, wondered why the Federal Government would be subsidising electricity for the rich and individuals who could afford it. To him, the subsidy should be for the poor and not those living in high-brow locations.

“How will the government be subsidising power for rich men and people using Rolls-Royce? How will the government be subsidising power for people living in Ikeja GRA? It is not proper. But we don’t have a database to determine who is rich or poor in this country. If there should be a subsidy on power, it should be for the low-income earners, the poor; not the rich,” Oduntan maintained.

As Adelabu advocated for a cost-reflective tariff, there were cries that another subsidy removal would compound the woes of Nigerians, 133 million of whom are already grappling with multidimensional poverty. This was when he proposed the removal of the subsidy in phases for the next three years. He said it would not be fair to remove the subsidy at once in the face of current economic hardship.

“Resulting from the high inflation of almost 30 per cent, devaluation of the naira and petrol subsidy removal, there is hardship. Everybody feels it. So, it is not the time that anybody will call for a total removal of electricity subsidy. No.

“It will sound highly insensitive to the feelings of our people. So, what we intend to have in the policy is a roadmap; probably, a two to three years roadmap that will migrate us into a cost-reflective tariff, which means that government subsidy will remain to the end, and we will keep reducing it from time to time.”

Even with this borne in mind, the subsidy on electricity was withdrawn completely from the tariff payable by power consumers in the Band A category, who the NERC said constituted about 15 per cent of the total number of power users across the country.

The government, through the commission, added that those affected would now pay a tariff of N225 per kilowatt-hour, up from the previous rate of N68/kWh, representing about a 240 per cent increase. This has since generated widespread anger among Nigerians, who accused the government of insensitivity.

Aside from accusations of insensitivity, some Nigerians expressed surprise that a set of individuals said to be under Band A would have about 20 hours of electricity supply when many could not boast of a one-hour supply in months. It was said that these 15 per cent Band A customers consume about 40 per cent of the total power generation in the country.

Since the announcement, Nigerians now buy four units of electricity at the rate of N1,000. Unmetered customers are afraid of estimated billing. Civil society organisations, consumer groups, manufacturers and individuals have kicked against the tariff hike, calling on the government to rescind the decision which they said would deepen hardship and energy poverty in Nigeria. There are fears that the hike would soon spread to other customers while manufacturers would increase the prices of goods.

But at a press briefing in Abuja on Friday, the power minister insisted that the Federal Government would continue with the new tariff regime for Band A consumers despite calls for its reversal.

The minister said, “We are in the subsidy pricing regime, whereby the government provides a large portion of the cost of producing, transmitting, and distributing power.

“I must tell you that as of today, before the introduction of the tariff increase, the government was 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 N2.9tn for 2024. This is more than 10 per cent of the national budget. The power sector is just a single sector out of the many sectors that the government has to attend to.”

The minister also accused Nigerians of energy waste, saying they keep refrigerators and air conditioners on because electricity was too cheap. He reechoed that the subsidy removal would still spread to other bands sooner than later until there was no subsidy on electricity again.

Meanwhile, some customers on Bands B to E have complained of being billed as Band A customers. Similarly, many on Band A said they have not been given enough supply to justify their current Band A status, calling on the NERC to intervene.

On Saturday, the NERC directed those overbilled customers be refunded by April 11, while DisCos should release a full list of those on Band A.

Nigerians expressed shock when the Ibadan DisCo released a list that showed some erstwhile Band A feeders downgraded to as low as Band E, even with zero hours of power supply. The Farm feeder serving the Obasanjo Farm fell from Band A to E with as low as seven hours of power supply, a sad revelation of how the power sector had deteriorated.

Reacting, the Chief Whip of the Senate and senator representing Borno South, Ali Ndume, described the timing as wrong, saying Nigerians are yet to recover from the removal of fuel subsidy. Ndume condemned the move and called on the Federal Government to reconsider its position in the interest of Nigerians.

He said Nigerians were facing many challenges, including unprecedented inflation, poor purchasing power, insecurity, and other hardships. He said the Federal Government should focus on providing stable electricity to Nigerians, reducing inflation, stabilising the naira, reducing food prices, and providing other basic amenities to Nigerians before increasing the tariff.

The lawmaker also wondered why such an important decision was taken without duly consulting with the National Assembly as representatives of the people.

“The news of the increment came to me and many of my colleagues as a shock. It also came at a time when the National Assembly was on a break. I think the timing of this hike is very wrong. Nigerians are grappling with many challenges.

“To put this fresh responsibility on them is very unfair. Nigerians are yet to recover from the fuel subsidy removal of last year. Many Nigerians are still grappling with the ripple effects that the removal had on them. To now come up with this is wrong.

“I believe that the timing is wrong. There ought to have been some consultations, especially with the National Assembly, as representatives of the people,” he said.

The Pan-Yoruba sociocultural and political organisation, Afenifere, described the electricity tariff increase as an attempt to thwart President Tinubu’s economic recovery efforts.

Likewise, a chieftain of the Peoples Democratic Party in Ekiti State, Lere Olayinka, called on Tinubu to sack Adelabu for alleged incompetence which he said reflected his inability to ensure a steady power supply.

Olayinka accused the minister of insensitivity with the incessant electricity tariff increases, despite failure to ensure constant power supply since he assumed office.

“Sack power minister, Bayo Adelabu, now; he can’t even give you constant electricity in Aso Villa,” Olayinka told Tinubu’, advising the government to save itself from further embarrassment by replacing him with a professional.

In all of these, Nigerians seem not to be asking for too much than an improved power supply for all, regardless of the band. They also seek the provision of meters to all unmetered customers to end overbilling. They also begged governors to set up their power plants to stem the ugly situation.