Worries about economic hardship as Tinubu government contemplates cutting electricity subsidies

Nigerians are worried that the federal , headed by President Bola Ahmed , may soon consider eliminating , even though the country's economic situation is getting worse.

During a conference on February 14, 2024, Adebayo Adelabu, the Minister of Power, stated that the government's indebtedness has reached N3 trillion, making it unable to continue subsidizing power.

Among Nigerians, Adelabu's comment has come as a shock.

Many feel the government is only trying to make things worse for the people after removing fuel subsidies and floating the Naira.

Eliminating power subsidies will make life even more difficult for the majority of Nigerians already struggling with high prices, stagnant wages, and record-high inflation (which hit 29.90% in January 2024).

At the same time that it warned the most populous country in Africa about gasoline subsidies and the Naira's floating value, the International Monetary Fund felt that should end its electricity subsidy program as well.

This change has put Nigeria in a tough spot, forcing the country to decide between maintaining its electricity subsidy program or switching to a cost-reflexive price.

The Electricity Regulatory Commission reports that between 2015 and 2022, the nation spent a total of N2.8 trillion on power subsidies.

In 2023, cost-reflective tariffs reached N124/kWh due to inflation and constraints on foreign exchange, and the government spent N600 billion on power subsidies.

At the same time, in 2024, the government plans to spend N1.6 trillion on power subsidies.

The flip side is that electricity tariffs in Nigeria have increased at least five times from 55% of cost recovery to 94% from January 2020 to January 2023. This is despite a number of problems, including a lack of supply, frequent outages, and crumbling distribution infrastructure.

That is why, even though it was privatized in 2013, the country's power sector failed to live up to expectations.

Despite having a population of over 200 million, Nigeria has continued to face challenges in its electricity sector, with a low power generation capacity of approximately 5,625MW, an inadequate transmission capacity of 8,500MW, and an inadequate distribution capacity of 8,425MW.

One example is the recent decline in power supplies across the country due to DisCos-induced power shedding or rationing.

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The administration, meanwhile, pointed the finger at gas shortages.

Even in the post-privatization age, the Nigerian power supply industry is hungry for expansion. Some people think we should get rid of electricity subsidies, but others are certain about them since they provide a vital social function.

Adebayo Adelabu, the Minister of Power, never announced that power subsidies would be eliminated, according to Bolaji Tunji, who spoke exclusively to DAILY POST on Monday. Tunji is the minister's special assistant on strategic communication and media relations.

He brought up the fact that the Minister had proposed presenting the country's power sector with all possible answers to the problems that had persisted for some time.

Tunji stated that the continuation of power subsidies or the adoption of cost-reflective price is a decision for President Bola Ahmed Tinubu and the people of Nigeria to make.

The minister's stated goal was to lay forth all possible solutions so that the president and people of Nigeria may choose between a cost-reflective tax and keeping the fuel subsidy.

It is up to the Nigerian people and their president to determine whether or not to remove electricity subsidies. According to the minister, the electricity subsidy will not cause any problems as long as it is backed by funds. If the government is unable to continue, then Nigerians should decide.

Let's have a cost-reflective tariff; we've decided we can't keep the power subsidies. It was never stated by the Minister that the Government intended to eliminate power subsidies. Nothing along these lines is in the works at this time.

You might have seen that the Minister threatened the DisCos with license revocation unless they reviewed their performance.

The Nigerian federal government continues to view the electricity industry as a social service.

“The federal government needs to make a decision on whether to end the power subsidies or implement rates that reflect actual costs. That decision will be made by the government. He promised to keep on if the funds were there today to settle all the bills.

Eze Onyekpere, lead director of the Centre for Social Justice, said that the government should not even consider doing away with electricity subsidies because it would make things even worse for the already struggling Nigerian people.

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He admonished the government against weakening the will of Nigerians by making their current situation even worse.

Service providers in the Nigerian electricity supply industry, including DisCos and GenCos, should think about raising the bar on service quality, in his opinion.

Our current electricity tariff has climbed by a factor of four in the past few years. Providers of power services, such as GenCos and DisCos, are still receiving payment from the subsidies.

No amount of doubling the rate will result in an improvement in service quality. Raising the tariff has no rationale and will not improve service. Improving service quality should be the focus of the discussion.

Both my home and place of business are powered by generators. Nobody should bother trying to sound kind to the government when they cause us so much suffering.

The minister need to step down if he is confused about his role. A lot of people in Nigeria are thinking about ways to make things worse, and they're hungry and there's no food. The message being conveyed to him is that the removal of the electricity subsidy would lead to an uprising among the Nigerian people.

“The elimination of electricity subsidies should not be considered by the government. He spoke to DAILY POST on hunger and the recent spike in food costs.

Electricity users are worried that the government will cut off power subsidies on March 1, 2024, leading to a spike in electricity prices, according to Kunle Olubiyo, president of the Nigerian Consumer Protection Network.

After the fuel subsidy was removed and the Naira floated, he thinks it would be foolish for the government to make things worse for Nigerians.

He warned that democracies in Nigeria risk collapsing if power subsidies are cut.

The president should not force Nigerians to their knees by withholding tax breaks and other measures that will alleviate their mounting suffering, Olubiyo said.

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He claimed that the current events in Nigeria were precursors to the now-famous Arab Spring.

The possibility of a power tariff freeze by March 1, 2024, according to Olubiyo's statement to DAILY POST, suggests that a rate increase could occur on that day.

Our biggest worry, though, is that the infrastructural gaps, operational efficiency issues, and inefficient power distribution that are preventing services from being as efficient as they could be will not be resolved overnight.

“The matter of meters is one in which we both believe. There is currently no customer-facing metering program that is crystal obvious. Also, you know that meter prices might go up by fifty to one hundred percent. Therefore, Nigerians are in for a terrible surprise if the government decides to unleash all of the cylinders at once.

The fuel subsidy cut and the Naira's fluctuating value are still stinging Nigerians. Government gasoline subsidies are at record highs compared to pre-May 29, 2024 levels. The government is facing a major conundrum, and compromise is inevitable. Some tax breaks from the government are inevitable.

Because there is no distinguishing feature between the Arab Spring and the current climate in Nigeria, the government must institute a buffer effect. Nigeria is experiencing each and every one of the signs that led to the Arab Spring

The government should step away from the power market's transmission operations; it would be for the best. Because they anticipate payment from the government, some vouchers given to them are not thoroughly examined.

Last but not least, “we want to act as if we no dey fear” should not be an excuse to weaken democratic institutions and their stability.

The public's reactions will be too much for the government to handle. If the government is concerned about national security, it should not draw its feet on economic policies that could weaken democracy. A social equilibrium is required.

“Nigerian citizens should not be forced to take to the streets by the government's decision to fire the cylinder from all sides. “The government needs to make some compromises,” he stated.

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