A Review of the Nigerian Energy Industry

Nigerian govt to subsidise electricity from 2012

12 November 2011, Sweetcrude, Abuja – Nigeria’s Minister of Power, Prof. Barth Nnaji, says the Nigerian government would be introducing a 3-year subsidy scheme for the power sector as from January 2012.

Nnaji spoke on “Power Generation, Transmission and Distribution” in Abuja at the 17th Nigerian Economic Summit.

According to him, the subsidy would serve “as cushion to the urban poor and rural dwellers who are unable to afford the planned hike in electricity tariff by government.”

He did not give the cost of the proposed subsidy, but, the plan is for the government to set aside N100 billion in the 2012 budget for the purpose.

Nnaji said: “We will have subsidy for sure; by January. Nobody will come and invest in the power sector unless you have cost-reflective tariff and what we have done is to solve the problem by raising the tariff now but providing subsidy to those who cannot afford to pay.”

He added: “The subsidy goes to the distribution companies; they have certain rates for residential consumers and the commercial consumers like the banks. The distribution companies will collect much less money from poor consumers and they’ll make up through the subsidy that would come to them.”

According to him, “It’s a very efficient way; we’ve worked on it to ensure there is cushioning of the rate shock. These cost-effective tariff will ensure that we have investors coming here without which it would be extremely difficult to convince people even the bidders that we are serious.”

The Minister said the subsidy on power tariff would last from 2012 to 2014 and would be suspended thereafter when there would have been stability.

President Goodluck Jonathan had hinted on this plan when he said some of the knotty issues standing on the way of the privatisation of the power sector would be resolved by the first quarter of next year.

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