Nigeria’s Minister of Power, Adebayo Adelabu, has said that the Federal Government increased electricity tariffs to catalyze investments in the power sector. He said this during the just-concluded NOG Energy Week in the Federal Capital Territory, Abuja.
According to him, the power sector would require over five times what the industry currently uses from the domestic gas market to achieve the 70 per cent thermal energy target with gas-powered generation. So, additional investments would be needed to increase the country’s gas production to achieve this gas supply to the power sector without compromising export obligations.
The Minister also said that liquidity is needed in the value chain. The Federal Government understands this need and has worked to introduce a cost-reflective tariff for the sector’s most served grid-tied customer segment.
He said, “To this end, I call on the investors here today to strongly consider the investment in the further development of gas production in the country, especially our abundant unexploited non-associated gas reserves.
Current realities
On July 3, 2024, Ikeja Distribution Company (DisCo) announced via X (Twitter) a review in tariff of Band A feeders from N206 to N209 per kilowatt hour, effective from July 1. According to the company, tariffs for other Bands remain unchanged. Note that a downward review was made by all DisCos in the first week of May 2024 from N225 to N206 after the Band A tariffs were hiked to N225 per kilowatt hour in April 2024.
Grid tariffs are still the cheapest
During his speech at NOG Energy Week, the Power Minister said that grid electricity tariffs were still the cheapest compared to diesel and petrol generator costs. “The grid is still the cheapest, the most efficient, and the least cost for our productive activities. I believe everybody should come together to ensure that we have a national grid attractive to electricity users.
According to him, Nigerians spend N1 trillion of their revenue on grid power; however, their overall spending on generators, diesel, and petrol is close to N20 trillion annually. He maintained that even if just a quarter of that is put in the official grid, there will be an incremental revenue of N5 trillion, possibly making it N6 trillion.
Legacy debts
Adelabu stated that the Federal Government is actively addressing longstanding debts. He mentioned that presidential approval had been given to resolve power sector obligations and to pay off these debts owed to generation and gas companies. This move demonstrates the government’s dedication to ensuring an efficient gas supply for Nigeria’s power sector. It also assures investors, giving them confidence that they can recoup their investments in the country.
Renewable energy
Adelabu stated that the recent completion of the $550 million Nigeria Electrification Project demonstrates the benefits of investing in renewable energy, such as reducing carbon emissions, enhancing energy security, and supporting economic development. In addition, the $750 million DARES project will provide electricity to 2.5 million people in Nigeria by deploying solar home systems and mini-grids. These investments will help Nigeria achieve its energy mix and transition targets.