Nigeria plans to axe electricity subsidies for a select group of consumers in a bid to rein in ballooning public finances, the presidency announced on Tuesday. This move follows a series of reforms undertaken by President Bola Tinubu aimed at stimulating economic growth.
“With the huge subsidy burden and high cost of gas … the current electricity tariff is not realistic,” said presidential spokesperson Bayo Onanuga. The government currently spends a staggering 3.3 trillion naira ($2.6 billion) annually on electricity subsidies, with only 450 billion naira budgeted for 2024.
The reform will target 15% of consumers – those responsible for 40% of overall electricity consumption – in an attempt to raise an estimated 1.1 trillion naira per year. However, concerns linger about the potential impact on inflation, which already sits above 30%.
“The proposed increase would help businesses recover costs and boost investment in the sector,” Onanuga explained. However, critics argue the move could further exacerbate the cost-of-living crisis for many Nigerians.
Nigeria’s power sector grapples with numerous challenges, including an unreliable grid, gas shortages, and mounting debt. The country boasts an installed capacity of 12,500 megawatts but generates only a fraction of that, forcing many to rely on expensive diesel generators.
Subsidy removal is a contentious but potentially necessary step towards a more sustainable electricity sector. The government is also exploring options to assist power generation companies struggling with a 1.5 trillion naira debt owed by the bulk electricity purchaser.
