Nigeria - Government To Remove N50B Yearly Electricity Subsidy

As consumers await the take-off of a new electricity tariff regime from June 1, the Nigerian Electricity Regulatory Commission (NERC) has said the yearly N50 billion subsidy, an intervention window provided by the Federal Government for the lowest-paying customers - Residential (R1); R2 and Commercial (C1) customers, will be removed from January 1, 2014.


The Executive Chairman of NERC, Dr. Sam Amadi, said in Lagos at the weekend that the  decision was reached in order not to create the impression that the window would be opened permanently.

“The issue of the subsidy is very critical. We are going to provide N50 billion in this 2012 and another N50 billion in 2013 and no more. The idea is that we don’t want it to be a permanent feature of the industry because it defeats the purpose of creating people, who can pay for the services they receive,” he added.
Amadi also stated that under the new tariff, the average cost of energy is N24, while lower categories of consumers would pay only between N4 and N22 per kilowatt hour, “depending on the class, until electricity supply improves and cost-reflective tariff introduced”.


He said the tariff was calculated based on the cost of maintenance of meters, replacement of transformers, expansion of facilities and the average cost of the total quantity of electricity to be consumed yearly for the next five years.


“The idea is that if we move to cost-reflective tariff now, it will expose some people to hardship, especially as energy supply is not yet available,” he said.


He debunked claims that poor customers would pay more under the new regime, stressing that the lowest-paying customers would no longer pay a fixed charge, which is currently being paid monthly by all categories of customers, irrespective of whether “there is power supply for the month or not”.


The NERC boss said the R1 customers, who are currently paying between N7 and N10, would pay N4 per kilowatt/hour, while the R2 customers, which constitute about 80 per cent of the consumers, would pay between N11.50 and N12.30, depending on their location.


“The new tariff is not uniform for customers in Lagos and Yola for instance, because the operation cost varies across the board. For instance, some have more staff and therefore, pay higher salaries but the range is small,” he said.


Amadi further disclosed that the C1 customers, who are artisans and small and medium scale entrepreneurs, would also enjoy subsidy and pay between N15.64 and N17 per kilowatt/hour, adding that since they contribute most of the household income, a huge energy bill would be a major challenge to them.


He however said that R3 and R4 customers, who have maximum demand meter and also take electricity supply direct from transformers would pay slightly above the average cost of energy to further subsidise the R1, R2 and C1 customers.


Amadi acknowledged that due to the poor electricity supply in the country, the unit cost of energy is still very high, adding that this would reduce when generation improves.


“South Africa produces about 40,000 megawatts with 47,000 electricity workers, while Nigeria produces 4,000mw with over 47,000 regular and casual workers. So, our productivity is very low, while the unit cost of energy is very high. The unit cost in Uganda is between N24 and N25; Republic of Benin is N29; Chad is N27.  Zambia is the only country in Africa that is probably lower than Nigeria,” he said.


He disclosed that as soon as electricity generation improves to about 13,000 megawatt, it would bring down the average cost of energy and tariff would go down.


Amadi stated that since the cost of the meter has been factored into the new electricity bill, consumers will begin to enjoy free meters with effect from June 1, while payment of meter maintenance fees, which constitutes 40 per cent of the current tariff, has also been abolished.



News Source: Thisday