The Federal Government Plans Nearly 300% Increase in Electricity Tariffs to Spur Sector Investment
The federal government is reportedly gearing up for an almost 300% hike in electricity tariffs in the coming weeks, aiming to attract more investments into the sector. According to reports from Bloomberg, unofficial sources suggest that electricity firms may raise tariffs for urban areas to N200 per kWh, a significant jump from the current N68 rate. While urban residents constitute only 15% of the population, they reportedly consume about 40% of the nation’s power, as indicated by an anonymous source.
Bayo Onanuga, the Special Adviser to the President on Information and Strategy, informed Bloomberg that the Nigeria Electricity Regulatory Commission (NERC) would soon announce a price adjustment, refraining from commenting further on the matter at the moment. He mentioned, “The regulator will issue any statements following discussions with distribution and generating companies. At this stage, the presidency cannot provide any additional details.”
Nigeria employs a fixed tariff system where the federal government determines electricity prices through the NERC. For 2024, the government aims to allocate approximately N1.67 trillion for electricity subsidies, reflecting a 170% increase compared to the previous year. Per NERC guidelines, electricity distribution companies were expected to phase out the subsidy program in the power sector starting from the beginning of 2025. The IMF had previously cautioned that fuel and electricity subsidy costs could amount to up to 3% of GDP by 2024.
President Bola Tinubu had previously eliminated the longstanding fuel subsidy upon taking office, citing its detrimental impact on Nigeria’s finances. However, recent fluctuations in global crude oil prices and naira depreciation have prompted speculation that the federal government may revisit this decision. In recent developments, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) raised the price of domestic natural gas used in generating around 70% of electricity to $2.42 MMBtu from $2.18.
Minister of Power, Bayo Adelabu, hinted at plans to sell gas to power plants across Nigeria in local currency due to the scarcity of foreign exchange in the country.
