It did not disclose how the financial gap that will be created by the removal of subsidy will be bridged. It did not state how the additional cost of making electricity available after subsidy removal will be offset without shifting the cost to Nigerians who are already grappling with high electricity tariffs
If there is any area of governance and national life that has been hit the most by Nigeria’s perennial institutional failure, fiscal recklessness, structural imbalance and jarring corruption, it is the power and electricity sector. The inability of successive governments to address the nation’s electricity challenges has significantly hindered the country’s growth, making it nearly impossible to harness its massive potential and vast resources.
On Thursday, the federal government announced that it will be ending electricity subsidy payments from 2027 as part of efforts to tackle mounting liabilities in the power sector. The Minister of Power, Joseph Tegbe, announced this at a media interactive session on Friday.
What Tegbe said
The minister disclosed that the proposed removal forms part of broader reforms aimed at ensuring the long-term sustainability of the electricity sector while tackling the financial challenges facing the sector. Tegbe explained that despite the planned subsidy withdrawal, there are no immediate plans to increase electricity tariffs, reassuring consumers that the government is not considering a tariff hike in the short term.
“The Power Consumer Assistance Fund will play a critical role in cushioning the impact on vulnerable consumers as we implement these reforms,” the minister stated.
He pointed out that the implementation timeline and consumer protection measures would be unveiled as the process progresses, emphasising that Nigeria’s electricity subsidy has remained a major fiscal burden.
Looking at the bigger picture
While the government has framed the proposed abolition of subsidy as a critical and inevitable fiscal decision, it did not disclose how the financial gap that will be created by the removal of subsidy will be bridged. It did not state how the additional cost of making electricity available after subsidy removal will be offset without shifting the cost to Nigerians who are already grappling with high electricity tariffs.
If the minister claimed “there are no immediate plans to increase electricity tariffs”, does that mean an electricity tariff hike will eventually happen at some point after the full removal of subsidy? He stated that the “goal is to build a commercially viable power sector while protecting vulnerable consumers”, but he did not provide any additional details as to how this will be done. No information about financing and technical support that will make this possible. The minister just wants Nigerians to take the words and promise of a government that has plunged them into unprecedented hardship as the gospel.
It is also noteworthy to mention the pending issue of the government’s legacy debt to the electricity companies. Recall that the Association of Power Generation Companies (APGC) recently said the federal government owes about N6.5 trillion in debt to GenCos.
Tegbe’s latest announcement also comes amid steps already taken by the government to clear power sector debt, following a presidential approval for the issuance of a N4 trillion bond. In January, the federal government issued a N501 billion inaugural bond under the presidential power sector debt reduction programme (PPSDRP). On July 20, it announced the issuance of the second tranche of a bond valued at about N729 billion for the settlement of verified legacy debts owed to GenCos.
As with previous promises that Nigerians will not be negatively impacted by policies that brutally gut programmes and schemes that ameliorate their social and economic burden and make life relatively easy for them, which turned out to be a ruse, Nigerians are right to be wary of the latest promise and assertion that the removal of electricity will not affect them. The government needs to be forthright and frank with the people regarding the details of how it planned to tackle the operational and financial challenges in the power sector. It did not outline the funding mechanisms and policy framework that it plans to use to revamp the sector to make it “commercially viable” without passing the cost to inflation-battered and much-tried citizens.
The timing of the implementation has also raised concerns, as it laid bare the insincerity of the government; many have opined that the reason the government slated 2027 for electricity subsidy is because of the general elections, which will hold in January. Removing electricity subsidy six months before the elections — after how the removal of fuel subsidy and the devaluation of naira immiserated and inflicted unprecedented hardship on Nigerians — could affect the chances of President Bola Tinubu, swing the electoral pendulum to the opposition’s side and drive a heavy nail in the electoral coffin of a government that is already unpopular.
While the government wants Nigerians to believe that the scrapping of electricity subsidy will not translate to a hike in electricity tariffs, like how the removal of fuel subsidy sent fuel prices through the roof, the timing of the removal and the language of the minister say otherwise. Already, Nigerians are groaning under the weight of what they believe to be a prohibitive and insanely high electricity tariff, a situation that has forced many entrepreneurs out of business. If the government eventually remove electricity subsidies next year, Nigerians will be forced to pay more for electricity and also contend with a sharp rise in inflation
