Despite calls for its reversal, the Federal Government insisted on Friday on the 240% tariff increase that power consumers in the band “A” category must pay.It also disclosed that the short-term, subsidized power pricing regime would be followed by a three-year transition plan to a fully cost-reflective tariff
The Nigeria Labour Congress, however, was not pleased with the decision and advised the Federal Government to be ready for the fallout from the tariff hike, calling it “wicked” and “unpopular.” The Congress further emphasized that the government should be prepared because it chose to heed the World Bank and International Monetary Fund rather than its own advice.
NLC Head of Information Benson Upah stated, “We did say earlier that this tariff hike is insensitive and unpopular.” Therefore, I am sure the government is equally ready to face the consequences of its actions if it decides to carry out the hike or other evil deeds.
“We also stated that this will harm businesses and create a more hostile environment, as the manufacturers are claiming. No manufacturing has ever benefited from high power tariffs anywhere in the world. Not in the developed world, either.Therefore, the minister’s audacity in declaring that the policy will not change is beyond comprehension.
This implies that neither the President nor the Minister are in command. That the minister chose to follow an unpopular course of action is heartbreaking.”It demonstrates that the minister and the President are not in charge,” Upah continued. The World Bank and the IMF are in command.
They are the ones implementing this extremely harmful policy.Thus, our leaders need to be ready for the fallout from this extremely harmful policy. That is all I have to say for now on this matter.The Federal Government approved and announced the tariff hike that approximately 1.9 million consumers would have to pay on Wednesday, and manufacturers and organized labor had protested.
In the case of consumers in the band A category, which makes up approximately 15% of all 12.82 million power users nationwide, the electricity subsidy was discontinued entirely.At a press conference hosted by NERC in Abuja, the government revealed the increase in electricity prices.
It said that those impacted would now pay N225 per kWh, as opposed to the previous rate of N68/kWh, or a roughly 240 percent increase.According to the government, the choice became operative on April 3, 2024.
Nonetheless, the decision to raise electricity user tariffs was met with opposition from the Trade Union Congress, the NLC, and the Organised Private Sector, who demanded that it be overturned.They said that the tariff increase would worsen inflation, force manufacturers out of business, and force small and medium-sized businesses out of business.
Additionally, they asserted that no part of Nigeria currently has access to up to 20 hours of electricity per day.Band A power users are those who get up to 20 hours supply of electricity daily.
At a press briefing in Abuja on Friday, the Minister of Power, Adebayo Adelabu, insisted that the Federal Government would continue with the new tariff regime for Band A consumers despite calls for its reversal.He said this was because the government could no longer continue paying humongous sums as power subsidy, stressing that subsidy on electricity for 2024 would cost the government about N2.9tn.
The minister declared, “We are in a pricing regime known as subsidy pricing, in which a significant amount of the cost of generating, transmitting, and distributing power is covered by the government.”I must inform you that, as of right now, prior to the imposition of the tariff increase, the government of Nigeria is subsidizing at least 67% of the expenses associated with producing, transmitting, and distributing electricity in the country.“At the current exchange rate, this is going to translate into N2.9tn for 2024.
This is more than 10 per cent of the national budget. The power sector is just a single sector out of the many sectors that the government has to attend to.”Adelabu said other sectors and ministries were competing for government funding and that “it will be very insensitive on our part to force or compel the government to continue to subsidise at the rate of almost N3tn for the power sector alone.
We just have to be realistic and considerate.”He noted that by ending the subsidy for band A customers, the government would save about N1.4tn, adding that this fund would be channelled into the development of other sectors such as health, education, works, etc.The minister argued that the tariff hike was pro-poor, as those affected were mainly residents who could afford the cost, but noted that subsidy on electricity was only going to be for the short term.
According to him, the Federal Government plans to end the subsidy on power within three years, and the withdrawal of subsidy from band A customers is just the pilot phase.
He said, “This tariff review conforms with our policy thrust of maintaining a subsidised pricing regime in the short run or the short term with a transition plan to achieve a full cost-reflective tariff for over a period of, let us say three years.“I have mentioned it in a couple of media briefings that it is because of the government’s sensitivity to the pains of our people that we will not make us migrate fully into a cost- reflective tariff or remove subsidy 100 per cent in the power sector like it was done in oil and gas sector.“
This is more like a pilot for us at the Ministry of Power and our agencies. It is like a proof of concept that those that have the infrastructure sufficient enough to deliver stable power and enjoy 20 hours of light to be the ones to get tariff hike.”