By Patience Chat Moses
For many Nigerians, the experience of electricity is a frustrating cycle of darkness punctuated by fleeting moments of light. Amidst this reality, a silent and often misunderstood mechanism has been at play: electricity subsidies. While some citizens remain unaware of its existence, others question its efficacy in the face of relentlessly increasing tariffs and persistent power outages. Adding fuel to the fire, recent pronouncements from the Minister of Power, Adebayo Adelabu, signalling the imminent end of these subsidies, have ignited a fresh wave of debate and anxiety.
Questioning the Functionality of Subsidies
Following the privatisation of the power sector in 2013, the responsibility for managing subsidies shifted, with the government often stepping in to bridge the gap between the cost of supplying electricity and the tariffs paid by consumers. This was often done through direct payments to generation companies (GenCos) and distribution companies (Discos).
Despite the billions of naira poured into electricity subsidies over the years, many Nigerians would be forgiven for questioning their impact. The stark reality on the ground paints a picture of persistent power shortages, frequent grid collapses, and a seemingly endless upward movement of electricity tariffs.
“I pay more for electricity every few months, yet I barely get six hours of consistent power a day,” laments Mrs Yakubu, a small business owner in Kaduna State. “If there’s a subsidy, I certainly don’t feel it in my pocket or in the stability of the power supply.”
The Minister’s Mandate: Preparing for Higher Bills
Early May, the Minister of Power, Adebayo Adelabu, and the Special Adviser to the President on Energy, Olu Verheijen, hinted a possible hike in electricity tariffs. According to Verheijen, the N200bn monthly subsidy benefited the wealthiest 25 per cent of Nigerians rather than those who truly needed assistance. The power minister lamented the Federal Government’s inability to pay the subsidy to the Discos, which has led to mounting debt due to a lack of liquidity in the sector. This announcement has been met with a mixture of apprehension and resignation by Nigerians. While some acknowledge the economic arguments for ending subsidies, many are concerned about the potential impact on their already strained finances, especially given the prevailing economic conditions and the unreliable nature of the power supply.
In an interview with Engr. Gambo Yusuf, a power sector analyst in Kaduna, the lack of transparency in the management of subsidies has been a major problem. Nigerians need to see clearly how these funds are being utilised and what tangible benefits they are receiving. Simply removing subsidies without addressing the underlying inefficiencies in the transmission and distribution networks will only lead to consumers paying more for the same unreliable service.”
What Could Happen Next?
The impending removal of electricity subsidies presents Nigeria with significant challenges and potential opportunities. Higher electricity bills will undoubtedly strain the finances of households and businesses, potentially leading to increased operating costs and reduced disposable income. Public dissatisfaction over poor power supply, coupled with higher tariffs, could lead to social unrest and protests. Increased energy costs could negatively impact the competitiveness of Nigerian businesses, especially small and medium-sized enterprises.
On the other hand, energy experts add that cost-reflective tariffs could make the power sector more attractive to private investors, leading to much-needed capital injection for infrastructure development. The pressure of higher costs could incentivise DisCos and GenCos to improve operational efficiency and reduce losses. Higher grid tariffs could make off-grid renewable energy solutions more economically viable, accelerating the adoption of cleaner energy sources, and a transparent tariff structure could lead to greater accountability from power sector players to deliver reliable service.
Nigeria’s electricity subsidy saga is a complex issue with deep historical roots, economic and social implications. The impending removal of these subsidies marks a critical juncture for the nation’s power sector. While the move is argued as necessary for long-term sustainability and attracting investment, its success hinges on a transparent and well-managed transition. Energy experts note that Nigerians must see tangible improvements in power supply and service delivery to justify the higher tariffs they will be expected to pay
