- FG will allow DisCos to raise electricity prices to N200 naira ($0.15) per kilowatt-hour from N68 naira for urban consumers this month.
- This increase in electricity prices aims to attract new investment and slash about $2.3 billion spent to cap tariffs.
Sources in the presidency have disclosed that the federal government is planning to almost triple electricity prices in the coming weeks. This increase aims to attract new investment and slash about $2.3 billion spent to cap tariffs.
According to Bloomberg, the federal government will allow electricity distribution companies to raise the prices to N200 naira ($0.15) per kilowatt-hour from N68 naira for urban consumers this month. Urban customers represent 15 per cent of the population and consume 40 per cent of the nation’s electricity.
This step to increase tariff results from pressure from Nigeria’s debt-burdened electricity distribution companies wanting to charge a cost-reflective price to improve their finances. In addition, President Bola Ahmed Tinubu aims to address price distortions by implementing these measures to alleviate this issue.
According to the spokesman for the presidency, “The regulator will make any pronouncements based on its discussion with the distribution and generating companies. The presidency cannot say anything at this stage. The electricity sector is hurting.”
Despite the privatisation of the state-owned power company into 11 distribution companies (DisCos) and multiple generation companies (GenCos) in 2013, the problem still persists. Meanwhile, the Nigeria Electricity Regulatory Commission (NERC) sets tariffs.
The federal government does not allow DisCos to charge enough to recover the cost of distributing electricity, with the government paying the difference as a subsidy to companies in the sector. In the past, the government said that DisCos was short of an estimated N2 trillion in capital and needed new investors to revive the industry.
The move will also help reduce government spending as it will now only subsidise the poor in rural areas. Furthermore, Bloomberg added that electricity subsidies gulped around N120 billion naira monthly before authorities devalued the currency at the end of January.