FG Announces Expected Increase in Electricity Tariffs Within Months

The Federal Government has revealed plans for an impending electricity tariff hike in the coming months, sparking concerns over rising living costs.

The Federal Government has announced that Nigerians should prepare for new electricity tariffs in the coming months.

President Bola Tinubu’s Special Adviser on Energy, Olu Verheijen, mentioned this during an interview in Dar es Salaam, Tanzania, as reported by Bloomberg.

Verheijen participated in a conference in Tanzania, supported by the World Bank, where Nigeria unveiled its $32 billion initiative to enhance electricity connections by 2030. Of this amount, private investors are anticipated to contribute $15.5 billion, while the remaining funds will be sourced from public entities such as the World Bank and African Development Bank.

The energy adviser stated that, for numerous customers in Nigeria, electricity prices should increase by approximately two-thirds to accurately reflect the cost of providing power.

Verheijen stated that to fund the maintenance necessary for improving reliability and attracting private investors into power generation and transmission, higher electricity tariffs are essential. These tariffs should be balanced with subsidies to support less-affluent consumers.

Verheijen mentioned that a major challenge they aim to address in the coming months is shifting towards a tariff system that balances cost-efficiency with cost-reflectiveness.

She stated that this is necessary to ensure the sector generates the revenue needed to attract private investment, while still safeguarding and supporting the poor and vulnerable.

The decision to increase tariffs arises from growing pressure by Nigeria’s debt-laden electricity distribution companies for tariffs to accurately reflect costs, enabling them to enhance their financial stability.

Nigeria privatized its electricity generation and distribution sectors in 2013. However, the prices determined by the government’s Nigeria Electricity Regulatory Commission fail to cover the costs incurred by suppliers. While government subsidies help bridge some of this gap, achieving profitability remains challenging for these companies.

Verheijen stated that Nigeria’s power sector requires substantial investment to meet its developmental goals. Despite having an installed capacity of 14 gigawatts, only 8 gigawatts can be transmitted nationwide and merely four or five gigawatts are effectively delivered to households and businesses.

Siemens AG is collaborating with the government on a $2.3 billion initiative to enhance transmission and distribution systems, while over 7 million Nigerians in rural regions have gained access to electricity through decentralized renewable energy projects.

Verheijen stated, “Your energy policies must align closely with your national ambitions. Our goal is to become a $1 trillion economy within five years and transition to an upper-middle-income country in 25 years.”

According to the International Monetary Fund, Nigeria’s gross domestic product is currently a little less than $200 billion.