Power Woes: Brace Yourselves, Nigeria's About to Get Real with Energy Costs
Federal Government Considering Electricity Tariff Hike, Cites Inability to Maintain Subsidies Sustainably
Get ready to dig deeper into your pockets, folks! Our favorite Minister of Power, Adebayo Adelabu, has sounded the alarm bell, warning that Nigeria's economy can no longer afford to props up electricity subsidies. He's urging us all to prepare for cost-reflective tariffs across the board.
According to the fine folks over at our website, Adelabu dropped this bombshell during a powwow with the Chairmen of Power Generating Companies (GenCos) in Abuja. He also spilled the beans about plans to settle part of the whopping ₦4 trillion debt owned to these GenCos.
Adelabu said, and I quote, "We've gotta accept the plain truth: Our economy can't support subsidies forever. Citizens gotta pay a fair price for the energy they consume." Now, he didn't define what qualifies someone as economically disadvantaged, but he said the Federal Government is still committed to providing targeted subsidies for those folks.
The Subsidy Gap and Reality Bites
According to a recent report by the Nigerian Electricity Regulatory Commission (NERC), we're currently paying an average of ₦88.2 per kilowatt hour (kWh), while the actual cost stands at ₦116.18 per kWh. That leaves a hefty gap of ₦27.97 per kWh, which, you guessed it, the government has been covering as a subsidy. Only 15% of electricity customers, those on Band A, are not reaping the benefits of this subsidy.
The FG's Promissory Note Plan
Adelabu revealed that the Federal Government is working on a payment plan involving a combination of cash and promissory notes to tackle, if not vanquish, a considerable part of the ₦4 trillion debt owed to the GenCos.
"There's a need to pay a substantial amount of the debt in cash. At the minimum, let's pay a decent chunk, then issue promissory notes for the rest." Adelabu announced. He also mentioned a high-level meeting between President Bola Tinubu and the GenCos' leadership is in the works, with the aim of cementing the proposal.
Earlier in the meeting, Colonel Sani Bello (retd.), Chairman of Mainstream Energy Solutions, warned that the power sector was on the brink of collapse due to severe liquidity constraints. "Without immediate intervention, the whole power ecosystem could tumble," he cautioned, citing the ₦4 trillion backlog as a major issue.
Kola Adesina, Chairman of Egbin Power and First Independent Power Limited, echoed the concern. "This is a national emergency. Everything depends on power-industries, homes, hospitals. We can't risk letting the sector collapse," he said.
GenCos' List of Woes
The CEO of the Association of Power Generating Companies (APGC), Dr. Joy Ogaji, ticked off a list of issues plaguing the sector, including chronic payment defaults, erratic gas supply, foreign exchange volatility, burdensome taxes, and frequent grid failures.
Ogaji highlighted that the sharp depreciation of the naira-from ₦157/$1 in 2013 to over ₦1,600/$1-has wiped out maintenance budgets and crippled GenCos' ability to repay loans. "GenCos have shouldered unsustainable risks while remaining patriotic," she added.
You may like
- 'Nigerians Are Sick of Your Propaganda, Let There Be Light, Not Lies' - NLC Slams Minister Adelabu
- 2027: Adelabu Will Be Exceptional Governor For Oyo - Tunji
- Over 80 Million Nigerians Struggling with Power Supply Issues - Adelabu Discloses
- GenCos Warn of Nationwide Blackout as ₦4 Trillion Debt Threatens Power Supply
- 'We're Almost Done' - Adelabu Hints on Why National Grid Collapse May Not Happen Again
- Tinubu Shattered 40 Years Jinx in the Power Sector - Adelabu's Aide
- Brace yourselves, Naija, as the economic reality of Nigeria's power sector demands increases in energy costs, according to Minister of Power Adebayo Adelabu.
- In an attempt to tackle the ₦4 trillion debt owed to Power Generating Companies (GenCos), the Federal Government plans to combine cash payments with promissory notes, as revealed by Minister Adelabu.
- Adebaboyo Adelabu's cost-reflective tariffs across the board signify a shift away from subsidies, which have, on average, resulted in a ₦27.97 per kWh gap between consumer rates and actual costs, as reported by the Nigerian Electricity Regulatory Commission (NERC).
- The current electricity subsidies mostly benefit the 15% of electricity customers in Band A, leaving the majority of Nigerian citizens paying unsubsidized power tariffs, according to Adelabu's comments.
- With the power sector facing severe liquidity constraints, leaders within the sector, including Kola Adesina and Dr. Joy Ogaji, emphasized the need for immediate action to secure the nation's energy infrastructure, avert potential power outages, and safeguard critical industries that rely on uninterrupted power supplies.
