Adelabu: Investors showing interest in electricity sector since tariff hike

Adebayo Adelabu, minister of power, says investors are now showing interest in the electricity sector because the federal government increased electricity tariff for Band A customers.

On April 3, the Nigeria Electricity Regulatory Commission (NERC) approved an increase in electricity tariff for customers under the Band A classification.

The commission said customers under the category, who receive 20 hours of electricity supply daily, will now pay N225 per kilowatt (kW), starting from April 3 — up from N66.

Appearing before the senate committee on power on Monday, Adelabu said the federal government could not afford to pay subsidies on power anymore.

“The government will be needing about 2.8 trillion to subsidise electricity this year, and we look at the government budget itself, we look at the provision for subsidy, we discover and confirm that the government could not afford to pay,” he said.

“This government budget is 28 trillion naira. N2.8 trillion is a subsidy for power separately. It is over 10 percent of the budget, which is not realistic for us to ask the government to pay.

“For this sector to be revived, the government needs to spend nothing less than $10 billion annually in the next 10 years. This is because of the infrastructure requirement for the stability of the sector, but the government cannot afford that.

“And so we must make this sector attractive to investors and to lenders. So for us to attract investors and investment, we must make the sector attractive, and the only way it can be made attractive is that there must be commercial pricing.

“If the value is still at N66 and the government is not paying subsidy, the investors will not come. But now that we have increased the tariff for A Band, there is interest shown by investors.”

Adelabu said more than N1.3 trillion is being owed to generating companies.

“There has not been funding for this subsidy. And this has culminated into each debt yearly now for the operators in the industry, especially the generating companies and the gas supply companies,” he said.

“As of the last estimate, we said 1.3 trillion naira is being owed to the five generating companies, while the legacy debt of the gas supply companies stood at $1.3 billion in 2023.

“The total tariff, the total subsidy for the tariff, was supposed to be N720 billion. The government only funded N400 billion leaving a total of over 300 billion brought forward to 2024.

“And at the current pricing regime, we estimated that it will retain the tariff at current rates.”

Adelabu added that the high indebtedness is the reason the government removed subsidies on electricity tariff.