The important background to all this is that for now it’s ONLY Band A consumers who are affected by the three-fold tariff increase rolled out this week. There are five tariff bands in all – A to E. Band A is the one that guarantees a minimum of 20 hours of electricity supply per day… Prior to the tariff change, the Federal Government was subsidising 67 per cent of the total cost of generating, transmitting, and distributing electricity in Nigeria.
It is quite sad (but not surprising) that it is the ‘freezer’ comment that’s totally dominated the headlines from the recent electricity press briefing. There was a lot more that was said, that’s useful to know, as background and basis for conversation and debate.
If you want to know what else HM Bayo Adelabu said, I took some notes and the comments below are attributable to him (and to the Nigerian Electricity Regulatory Commission (NERC) Vice Chair, who also spoke).
The important background to all this is that for now it’s ONLY Band A consumers who are affected by the three-fold tariff increase rolled out this week. There are five tariff bands in all – A to E. Band A is the one that guarantees a minimum of 20 hours of electricity supply per day.
Prior to the tariff change, the Federal Government was subsidising 67 per cent of the total cost of generating, transmitting, and distributing electricity in Nigeria.
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The Nigerian Electricity Regulatory Commission Vice Chair added that: If you isolate generation, that 67 per cent figure rises considerably. For example, in January, the total power generation invoice issued to DisCos was N240 billion, but the DisCos were asked to pay only N24 billion of this – 10 per cent, which means 90 per cent of the generation cost was being borne by the Federal Government of Nigeria (FGN) as a subsidy.
The total estimated electricity subsidy cost to the Federal Government for 2024, without tariff adjustment, will be ~N2.9 trillion (that is ~240 billion per month).
The total estimated subsidy cost for 2024, after tariff adjustment, will be ~N1.4 trillion (that is ~N113 billion per month).
The tariff increase has also been accompanied by a reduction in the number of Band A “feeders” guaranteed to supply a minimum of 20 hours per day across the country. There were previously over 1,000 Band A feeders; now, only 481 are classified as Band A.
There are about 12 million electricity “customers” in Nigeria (please try and understand this carefully before jumping to make comments. It doesn’t mean 12 million ‘people’, it means 12 million ‘meter-able’ consumption points, e.g households, businesses, etc).
Band A accounts for 15 per cent of the 12 million electricity customers, which is approximately 1.8 million. The remaining less than 10 million customers will continue to enjoy government subsidies on electricity consumption.
Related to this, I’ve seen data elsewhere that suggests that 70 per cent of the revenues collected in 2023 came from Band A; this figure is worth confirming.
Of the 12 million customers, only a little over five million are currently metered. Which means there is a metering gap of over six million.
The subsidised pricing regime will continue in the short term, with a “transition plan” to attain full “cost-reflective” pricing over the next three years.
The restriction of the tariff increase to Band A is meant to serve as a “proof of concept”; i.e. kicking off with a Band that has the “capacity and willingness” to pay for 20 to 24 hours of daily supply.
The pricing change will help address some of the liquidity issues in the industry, restore a “line of sight” for recovery of investment, and make it more “bankable.”
There is a huge infrastructure deficit in the power sector; obsolete equipment at all levels (this is where the Minister cited the example of some equipment still carrying ECN branding, with ECN having been defunct for more than 50 years now); and vandalisation of everything from gas pipelines to grid towers, etc.
If DisCos supply less than 20 hours to Band A consumers, there must be sanctions and consequences. “We will not shy away from our responsibilities…”
On this note, the NERC Vice Chair added that under the old Power Sector Reform Act, the powers of NERC to sanction are limited, and fines for DisCos are outdated (he cited fines as low as N10,000 per day). But with the new Act signed by President Bola Ahmed Tinubu, NERC now has expanded regulatory and sanctions powers. The Vice Chair cited the example of 2018 when NERC suspended the Ibadan Electricity Distribution Company (IBEDC) Board, which then went to Court and got the suspension set aside, versus 2024 when NERC was able to successfully dissolve the Board of Kaduna Electricity Distribution Company (KEDC).
The new tariff regime for Band A means there’s now an incentive for DisCos to work to migrate other Bands to Band A, so that they can supply them the Band A threshold, and charge Band A tariffs.
Energy consumption management by consumers has to become a priority. This is where the ‘freezer’ example (that has gone viral) was cited. Yes, it was definitely not the best example to use, as we’ve seen from the distracting fallout, but the larger point about more responsible usage stands.
The Minister mentioned ongoing efforts to improve electricity supply:
- The new Electricity Act signed by President Bola Ahmed Tinubu (which repealed the Electric Power Sector Reform Act of 2005) has now fully decentralised the sector, and it empowers subnational governments for regulation and licensing.
- Renewable energy investments, led by the Rural Electrification Agency (REA).
- New power plants like the recently-completed Zungeru Hydropower (700MW).
Investments in new lines, new injection substations, and new transformers. - Closing the metering gap.
- Communications and advocacy.
As the Minister, Bayo Adelabu put it, “The journey of a thousand miles stand with a single step, in the right direction. This one is in the right direction.”
Tolu Ogunlesi is a policy communication expert and former special assistant on Digital Communication to President Buhari.
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