The Federal Government of Nigeria has indicated its intention to increase electricity tariffs within the coming months.
In an effort to balance the impact on less affluent users, the government is considering implementing subsidies to support those most affected by the planned higher electricity tariffs.
Olu Verheijen, Special Adviser to the President on Energy, revealed this information during an interview in Dar es Salaam, Tanzania, with Bloomberg.
Verheijen attended the World Bank-backed two-day Mission 300 Africa Energy Summit in the Tanzanian commercial capital, where Nigeria presented an ambitious $32 billion plan aimed at improving electricity access and reliability by 2030.
The Nigerian plan anticipates substantial private-sector involvement, with private investors expected to contribute $15.5 billion.
The remaining funds would be sourced from public institutions such as the World Bank and the African Development Bank.
The Special Adviser explained that power prices needed to rise by about two thirds for many customers to reflect the cost of supplying it and an increase can be expected within months.
She added that higher electricity tariffs, which needed to be balanced by subsidies for less-affluent consumers, were required to fund the maintenance for the improvement of reliability and to attract private investors into power generation and transmission.
She stated that the Federal Government planned to transitioning to a cost-efficient, cost-reflective pricing model.
She harped on the need for higher electricity tariffs to ensure the sustainability of the power sector but added that while tariffs must reflect the actual cost of power supply, subsidies would be maintained to protect low-income consumers.
Verheijen said: “One of the key challenges we’re looking to resolve over the next few months is transitioning to a cost-efficient but cost-reflective tariff.
“This is needed, so that the sector generates revenue required to attract private capital, while also protecting the poor and vulnerable.”
The Special Adviser said that the power industry in the country required substantial investment to meet its development targets.
It could be recalled that out of the nation’s 14 gigawatts of installed power capacity, only 8 gigawatts can be transmitted nationwide, and merely 4 to 5 gigawatts are reliably delivered to homes and businesses.
Verheijen stated that Nigeria’s energy policies must be aligned with its long-term economic goals.
“Your energy policies have to be closely linked with your own ambition for your country.
“Our own ambition is to be a $1 trillion economy in five years and to move to an upper-middle-income country in 25 years,” Verheijen said.
