Despite the calls for its reversal, the Federal Government is standing firm on its decision to implement a 240% hike in the electricity tariff payable by power consumers in the ‘A’ category.
The Federal Government revealed that the subsidized power pricing regime will only be in place for the short term. They have a transition plan in mind to gradually move towards a full cost-reflective tariff within the next three years.
However, the decision did not go down well with the Nigeria Labour Congress, which told the Federal Government to prepare for the consequences of the tariff hike, which it described as wicked and unpopular, stressing that since the government preferred to listen to the World Bank and International Monetary Fund, it should be ready to face the consequences.
The Head of Information, NLC, Benson Upah, “We did say earlier that this tariff hike is insensitive and unpopular. So if the government elects to continue with the hike or persists in something that is evil, I’m sure it is equally prepared for the consequences of that evil.
“The manufacturers are saying this is going to hurt businesses and make the environment more hostile, and we also said so. There is no place in the world where high power tariffs have supported manufacturing. Not even in the developed world.
“So, it completely beats our imagination for the minister to have the audacity to say that the policy would continue. What this means is that the minister and the President are not in charge. It is saddening that the minister elected to pursue an unpopular policy.”
Upah added, “It shows that the minister and the President are not in charge. The people in charge are the World Bank and the IMF. They are the ones driving this highly injurious policy.
“So, our leaders should be prepared for the consequences of this highly injurious policy. That is what I’ll say about this issue for now.”
Manufacturers and the organised labour had kicked against the hike in tariff payable by about 1.9 million consumers, which was approved and announced by the Federal Government on Wednesday.
Subsidy on electricity was withdrawn completely from the tariff of consumers on the band A category, which constitute about 15 per cent of the total 12.82 million power consumers across the country.
The government announced the hike in electricity tariff at a press briefing in Abuja by NERC, adding that those affected would pay N225 per kilowatt-hour, up from the previous rate of N68/kWh, representing about 240 per cent increase.
The government stated that the decision took effect on April 3, 2024.
But the Organised Private Sector, NLC, and the Trade Union Congress kicked against the hike in tariff for power users and demanded that the decision be reversed.
They argued that the hike in tariff would send manufacturers out of business, worsen inflation and stifle small and medium enterprises, adding that there was no place in Nigeria currently enjoying up to 20 hours of power supply daily.
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 said, “We are in the subsidy pricing regime, whereby the government provides a large portion of the cost of producing, transmitting, and distributing power.
“I must tell you that as of today, before the introduction of the tariff increase, the government is subsidising nothing less than 67 per cent of the cost of producing, transmitting and distributing electricity in Nigeria.
“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.”
