FG to Phase Out Electricity Subsidy by 2027

... justifies increasing electricity tariff ....says 10.5m customers still enjoy 70% subsidy

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The federal government has said it will phase out electricity subsidy by 2027. The government also said the decision to increase the electricity tariff for a segment of electricity consumers was to save the sector from total collapse and attract investment into the sector.

The minister of Power, Mr. Adebayo Adelabu, who disclosed this at a ministerial press briefing in Abuja yesterday said the power sector is facing serious liquidity issues which is making it difficult for the operators to perform optimally.

He said the poor liquidity issue has also made it difficult for prospective investors to venture into the area as they are not sure they will recoup their investment.

The minister lamented that at the current exchange rate regime, Nigeria would have been spending about N2.9 trillion, over 10 percent of the National budget, subsidizing electricity this year when there are other sectors also begging for attention. He said it would be insensitive to insist that the government should continue the full subsidy regime considering its lean resources and demands coming from other sectors.

The minister, however, said that even with the tariff hike, about 10.5 million electricity consumers are still enjoying almost 70 percent subsidy, adding that the increase affects only 1.5 million consumers.

According to him, “This new tariff regime is in line with our policy thrust of retaining a subsidised pricing regime in the short run with a transition plan to achieve a full cost reflective tariff for the sector within a time frame of three years.

“We are sensitive to the pains of the people that is why we are not taking everything away at once. It is going to be a gradual process.”

He also said that it is not just about increasing the tariff, the government is also mindful of ensuring people get value for their money.

“We also want to be sure that the regulators are working, that there is consequence management for non compliance by the operators in terms of punishment. What we also want to achieve is consumer protection and value for money,” the minister said.

“20 hours must be 20 hours or there would be sanctions. It is an incentive to migrate from band B or C to band A.”

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