Nigerian Govt. Plans to Triple Electricity Prices To Offset Subsidy

Sources within the presidency have disclosed that the Nigerian government is planning to triple electricity prices in a bid to cut the about $2.3 billion spent on subsidy annually.

According to a Bloomberg report, power companies will be authorised to raise prices to 200 naira ($0.15) per kilowatt-hour. This is a substantial increase from the current rate of 68 naira for urban consumers.

“These customers represent 15 percent of the population that the government says consume 40 per cent of the nation’s electricity”, the reports stated.

The move, reportedly spearheaded by President Bola Tinubu’s administration, seeks to rectify persistent distortions in pricing within the sector, despite previous privatisation initiatives initiated in 2013. Although privatisation efforts aimed to enhance efficiency, the setting of tariffs remains within the domain of the Nigerian Electricity Regulatory Commission. The government-controlled body is yet to issue any statement on the matter.

Bayo Onanuga, a Special Adviser to the president, stated that official pronouncements regarding the tariff adjustment would be made by the regulatory authority following consultations with stakeholders. He, however, enphasised the urgency of addressing the sector’s challenges, especially due to its adverse effects on the economy.

Despite Nigeria’s abundant natural resources, the country continues to grapple with frequent power outages, with its grid supplying less than 4,000 megawatts to over 200 million inhabitants. Government estimates revealed a huge capital deficit of approximately N2 trillion in the electricity sector.

Recently, the Nigerian Midstream and Downstream Petroleum Regulatory Authority revised the price of natural gas, a key component in electricity generation, from $2.18 to $2.42 per one million British thermal units (MMBtu). The decision to raise tariffs comes amid mounting pressure from debt-laden electricity distribution companies, who are advocating for cost-reflective pricing to avoid running out of business. The tariff adjustment is meant to tackle this, as well as curb government expenditures on power subsidies.

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