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The International Monetary Fund (IMF) has suggested the “complete” phasing out of electricity subsidies in Nigeria, saying it would restore macroeconomic stability in the country.
The Bretton Woods Institution’s recommendation came as Nigerians are still battling the economic hardship occasioned by the scrapping of fuel subsidy on May 29, 2023, by the present administration.
Like the past gas subsidy, the electricity subsidy takes a huge chunk of the government’s revenue. Between January and September 2023, the Nigerian government paid a whopping N135.2 billion to ensure Nigerians had power supply.
The authorities set aside N1.6 trillion for electricity subsidy in 2024 despite the past administration of Muhammadu Buhari claiming to have “quietly” removed subsidy in the power sector.
Many Nigerians disagree with the IMF’s position on power subsidy. The country’s Minister of Power, Adebayo Adelabu, said it was needed to alleviate “additional burden on Nigerians.”
However President Bola Tinubu’s Federal Government has declared that Nigeria can no longer continue to subsidize electricity as the country must begin to move towards a cost-effective tariff model.
This was disclosed by the Minister of Power, Adebayo Adelabu, while addressing a press conference on Wednesday, February 14, 2024, in Abuja, where he revealed that the country’s power debt has continued to skyrocket. This is as it stated that the country is currently indebted to the tune of N1.3 trillion to generating companies (GenCos), while the gas companies are being owed $1.3 billion
While speaking at the press conference which also had the heads of all the agencies under the Federal Ministry of Power in attendance, Adelabu said state governments will now be allowed to generate power independently to supply power to their states. The minister stated that only N450 billion was budgeted for electricity subsidy in the 2024 budget. He, however, revealed that findings by the Nigerian Electricity Regulatory Commission (NERC) showed that subsidy would gulp about N2.9 trillion this year.
Speaking on the national grid that has collapsed for about six times between December 2023 and now, he said this was caused by shortage of gas, ageing machines in the grid value chain, low capacity to evacuate generated power, and destruction of power stations in some parts of the North-East geopolitical zone of the country.
He said the Transmission Company of Nigeria has over 100 abandoned projects due to variations on contract figures as a result of the fluctuations of the forex, hence the company will not award any new contracts till all such projects are completed.
The minister also said over N50 billion has been earmarked in the 2024 budget to build mini grids to supply power to remote areas.
Adelabu warned electricity distribution companies (DisCos) to sit up or have their licence withdrawn if found wanting.
He also said he has reached out to the National Security Adviser, Nuhu Ribadu to help provide security for power infrastructure.
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