CNBC Report
Nigera’s National Council on Power has adopted a cost-reflective tariff for electricity consumption to reduce the country’s 200-billion-naira monthly electricity subsidy. The tariff will target the vulnerable in a well-administered level.
Oti Ikomi, the CEO of Proton Energy, joins CNBC Africa to discuss the impact on the country’s electricity subsidies payment.
The National Council on Power adopted a cost-reflective tariff for electricity to manage Nigeria’s 200-billion-naira monthly electricity subsidy.
Bands A to E outline varying levels of electricity pricing, with Band E focused on the most economically vulnerable.
The electricity sector struggles with a looming two trillion naira debt, challenging the timeline for substantial fiscal reform.
In an ongoing effort to manage its electricity subsidy budget, Nigeria’s National Council on Power has endorsed a new cost-reflective tariff aimed at reducing the current 200-billion-naira monthly electricity subsidy.
This policy targets the nation’s vulnerable populations while aiming for a more sustainable fiscal approach.
The CNBC Africa discussed these changes and their potential impact on the electricity supply with Oti Ikomi, CEO of Proton Energy.
During the interview, Ikomi emphasized that electricity is a service with inherent costs. “You need to pay for a service. Power is a service,” he asserted, highlighting the complex machinery, fuel, and human resources required to keep the system running.
He further explained that the tariff bands, incorporated over a year ago, outline different pricing strategies based on consumer bandwidth—ranging from Band A to Band E, the latter serving the economically vulnerable.
In addition to targeting specific consumer groups, the council’s stance is to ensure these tariffs are well-administered and sustainable.
Band A users, for instance, who receive at least 20 hours of electricity daily, are charged 209-naira, 50-kobo per kilowatt-hour. Band E, catering to the most economically disadvantaged, remains unchanged. Other bands, i.e., B, C, and D, could undergo repricing based on service hours ensured, Ikomi noted. However, this repricing provokes public outcry due to unreliable power supply. Ikomi questioned if the discourses distribution companies could reliably ensure the service hours outlined: “The key thing is, how are the discourses able to ensure that the service improvements in hours of power per day is affected?” he pondered.
Adding to the fiscal complexity is contingency planning around a looming two trillion naira debt. The president and the prime minister have emphasized closing this gap by the third quarter, employing a mix of payments via promissory notes, cash, and other instruments.
Yet, Ikomi expressed concern, calling it an “aggressive timeline”—suggesting that the sector’s players, ranging from electricity generation companies (GENCOs) to distribution companies, struggle with liquidity. Despite these challenges, Ikomi evaluated the sector’s performance as “average.”
The current government target is to reach 6,000 megawatts after achieving 5,801 megawatts earlier this year. Nonetheless, alternatives like solar and renewable sources continue to gain traction, highlighting consumer shifts towards reliable and sustainable energy.
The need for decisive action is clear. Sustainable Energy for All had previously reported that renewable energy has already outstripped traditional supply methods fourfold a compelling metric pushing Nigeria’s power sector towards innovation to maintain pace with public demand.
Nigeria’s new electricity tariff strategy reflects a comprehensive yet cautious response to a decade-old issue of subsidy management in the power sector. Ikomi advises that assuring the public about service consistency and improving infrastructure investments are critical next steps to avert further discrepancies between policy intentions and market realities.
As Nigeria navigates this transition, stakeholders are hopeful yet pragmatic about embracing reforms.
The crucial variable lies in timely implementing policies and infrastructure enhancements to genuinely uplift the nation’s power grid and subsidy cost management