Nigerian state governments are perfecting plans to completely remove electricity subsidy and introduce a higher tariff to all consumers. This recommendation is contained in a document put together by the Nigeria Governors’ Forum, titled, ‘Development of the National Integrated Electricity Policy and Strategic Implementation Plan Policy Recommendations by State Governments to the Federal Ministry of Power,’ the states also stated that they would implement different electricity tariffs in their domains.
The NGF said, “Electricity is a commodity and a product that must be paid for by consumers. The states believe that electricity subsidies and other forms of financial interventions in the power sector by the Federal Government over the last 15 years have been inefficient and ineffective so far.
“Rather than improve the quality and reliability of service, electricity subsidies in the sector have been applied to cover inefficient costs and lack of service by Discos, TCN, GenCos and gas producers across the NESI.
“Moreover, the so-called electricity subsidies benefit only customers who are connected to the national grid and enjoy some form of supply reliability. Millions of households, particularly in underserved and unserved communities, pay more than twice the average true cost of on-grid supply.”
They stated that the 2001 National Electric Policy recommended the restricted use of subsidies for the promotion of universal access to electricity.
“States agree with the retention of this policy,” the governors stated.
They added, “To this end, states recommend that wholesale and retail electricity subsidies to customers and across the NESI value chain are reduced and eventually eliminated over time, except for pre-defined customer categories or in line with national economic growth initiatives.
“Where electricity subsidies are deemed necessary, the states propose a cost-of-service analysis which will be conducted by the state to determine the cost of supply and arising electricity subsidies for each state.
“Where electricity subsidies continue to be implemented as a specific policy of the Federal Government, it must provide funding for the subsidies before implementation.”
In addition, they noted that the method, and criteria for the application of electricity subsidies by the Federal Government should be transparent and precise with clear regulatory framework to determine the extent of subsidies required and category(ies) of consumers that would be eligible to receive electricity subsidies.
“The FMoP and NERC should also ensure that there should be no discrimination in implementing electricity subsidies, against states and regions, especially states and regions with more efficient electricity markets.
“It should also be noted that continuing electricity subsidies may undermine the viability and sustainability of state electricity markets.
“Thus, the Federal Government and states should collaborate in determining how any subsidy by the Federal Government is applied within a state electricity market. In this regard, the states propose a joint framework with the Federal Government for administering future electricity subsidies in a state electricity market,” the NGF stated.
Recall, the Nigerian government had, earlier in the year, announced the removal of subsidy on some power consumers, referred to as “Band A” customers. This proposal by the state governors seek to remove subsidies for all consumers.
