March 18, (THEWILL) – The Nigerian Electricity Regulatory Commission (NERC), has confirmed the removal of electricity subsidies by the Federal Government, adding that the commission will review tariff rates every six months.
Speaking during a press briefing, Chairman of the Commission, Sanusi Garba, said it is the duty of electricity distribution companies to inform their customers of tariff review outcomes and cost of power.
“The role of the commission is to make a determination of the rates that consumers should pay. So we strike a balance between consumers and investors”, Garba said.
Speaking on tariff hike, the NERC chairman said the adjustment was made in February following underlying economic considerations.
“What happened on February 1, 2022, is a minor review of tariff. It is very clear on our website that every six months, we will adjust rates to take care of the foreign exchange component of cost and also inflation”, Garba said.
Garba said the tariff adjustment was straightforward, emphasising that the distribution companies were meant to inform their customers of the changes.
He said that the electricity subsidy had been reduced in the past four to five years over its unsustainability regarding investors’ return on investments.
“Now subsidy is a policy issue determined by the government. The government will decide that the rates calculated or agreed by the regulator, may at this time not be passed on to consumers. It has happened many times.
“In the past four, five years the level of subsidy has gradually been reduced, because you cannot run the electricity market on life support and say that investors cannot get their return on investment until government steps in to provide the required funding.
“So that policy decision (stopping electricity subsidy) is as announced by the Minister of Finance. The subsidies have been, at one time as high as N600 billion a year, and gradually coming down to about N30 billion or so this year”, he said.
He blamed the poor state of electricity supply and grid collapses on vandalism of gas pipelines to power plants, plants maintenance and a trip on the 330KV line from Ughelli power plant.
THEWILL recalls that the Minister of Finance, Mrs Zainab Ahmed, had provided insight as to how the Federal Government managed to quietly remove the subsidy on electricity tariff.
According to her, the government had to carefully adjust the prices incrementally at some levels, while also pointing out that the same measures would be applied to PMS in the nearest future.
Ahmed pointed out that the amendment of the budget was ongoing to accommodate the incremental removal of fuel subsidy. The theme of the meeting was ‘The political economy of fiscal reforms.’
She said fuel subsidy remained a huge problem for the government as it had thrown up deficits more than what was planned. She noted that the rise in global oil prices would worsen the issue, ‘but the current review that we are doing is to hold the subsidy at the level in which it is planned”, she said.
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