According to Sanusi Garba, the Chairman of the Nigeria Electricity Regulatory Commission (NERC), the Federal Government of Nigeria will require N3.2 trillion in 2024 to undo the recent increase in electricity tariffs. He made this announcement during a meeting with stakeholders convened by the House of Representatives Committee on Power in Abuja.
Garba expressed that while the current investments in the sector are praiseworthy, they are insufficient to ensure a consistent power supply throughout the nation. He emphasized that without a complete overhaul of the sector, which includes addressing fluctuations in foreign exchange rates, Nigeria will continue to face challenges in power supply.
Before the recent tariff review, distribution companies were only required to pay 10% of their energy invoices, leading to a liquidity crisis in the sector due to insufficient cash flow.
The electricity tariff has risen from 55% in January 2020 to 94% in January 2023, with the cost reflective tariff reaching N184/kwh due to the unification of FX and current inflationary pressures.
Garba estimated that if no action is taken, the National Assembly and the Executive will need to allocate around N3.2 trillion for subsidy in 2024. He revealed that out of the N645 billion subsidy in 2023, only N185 billion has been funded, leaving a significant funding gap of N459.5 billion.
Musiliu Oseni, the Vice Chairman of NERC, supported the recent tariff hike as necessary to prevent a complete shutdown of the sector.
The Chairman of the House Committee on Power, Victor Nwokolo (PDP, Delta), stated that the purpose of the meeting was to address the recent tariff increase and the reclassification of electricity consumers into various bands.
Nwokolo mentioned that further consultations would be held with NERC, DISCOS, the transmission company of Nigeria, and the generation companies to gather additional information. He stressed the need for tariff adjustments to facilitate necessary changes in the industry amidst challenges such as population growth, network expansion, and fluctuating exchange rates.
Nwokolo clarified that the decision to halt the tariff increase lies with the entire House and not just the committee. A House resolution would be required to stop the adjustment.