Adebayo Adelabu, Nigeria's Minister of Power, has declared that the nation's economy can no longer sustain electricity subsidies, signaling a forthcoming transition to tariffs that accurately reflect the true costs of electricity generation, distribution, and transmission.
During a recent press briefing in Abuja, Adelabu emphasized the unsustainable nature of current subsidy expenditures, stating, "The government cannot continue to subsidize electricity at the rate of almost N3 trillion." He highlighted that the federal government had been spending approximately N204.59 billion monthly on electricity subsidies, with projections indicating an additional N1.6 trillion in 2024 to maintain low electricity prices for consumers .
The minister pointed out that the existing subsidy framework disproportionately benefits high-income individuals who consume the most electricity, rather than those who genuinely need financial support. "The largest portions of subsidies have been directed to areas with the highest per capita income," Adelabu noted, calling for a review of the subsidy regime to ensure it aligns with its intended purpose .
In response to these challenges, the government has already initiated a 35% reduction in electricity subsidies, primarily targeting high-usage consumers. This adjustment has generated an additional 700 billion naira in revenue, helping to alleviate some fiscal pressure and reduce the government's tariff shortfall from 3 trillion naira to 1.9 trillion naira .
Looking ahead, Adelabu foresees a gradual shift toward cost-reflective tariffs within the next three years. He emphasized the necessity of aligning electricity tariffs with the actual costs to ensure the financial viability of the power sector and attract investments for infrastructure development .
While the transition to cost-reflective tariffs may lead to higher electricity prices for consumers, the government is committed to implementing measures that protect vulnerable populations and ensure equitable access to electricity. Further details on these protective measures are expected to be outlined in upcoming policy announcements.
As Nigeria moves toward a more sustainable and financially viable electricity sector, stakeholders across the nation are closely monitoring the implementation of these reforms and their impact on consumers and the broader economy.
