The minister also said the country needs about $10 billion annually for the next ten years to revive the nation's power sector and end the liquidity challenge.
The Minister of Power, Adebayo Adelabu, says the federal government needs about N2.8 trillion to subsidise electricity and avoid increment in electricity tariff for the rest of the year.
The minister stated this on Monday when he appeared before the Senate Committee on Power to discuss increment in electricity tariff.
Mr Adelabu recently announced the federal government's plan to remove subsidies on electricity supply because the country cannot continue to afford it due to the huge indebtedness in the power sector to the tune of N3 trillion.
Subsequently, the Nigerian Electricity Regulatory Commission (NERC) approved a tariff increment for Band A consumers (less than a quarter of all consumers), allowing electricity distribution companies (DisCos) to raise electricity prices from N68 to N225 per kilowatt hour with effect from 1 April.
During Monday's meeting with the lawmakers, the minister stressed that Nigerians would need to bear the hike in electricity tariff because the federal government cannot afford to continue paying subsidies.
"The government will be needing about 2.8 trillion to subsidise electricity this year, and we look at the government budget itself, we look at the provision for subsidy, we discover and confirm that the government could not afford to pay.
"This government budget is 28 trillion naira. N2.8 trillion is a subsidy for power separately. It is over 10 per cent of the budget, which is not realistic for us to ask the government to pay," the minister said.
Nigeria requires $10bn yearly to revive power sector
Mr Adelabu also said the federal government needs about $10 billion annually for the next ten years to revive the nation's power sector and end the liquidity challenge.
"For this sector to be revived, the government needs to spend nothing less than $10 billion annually in the next 10 years. This is because of the infrastructure requirement for the stability of the sector, but the government cannot afford that.
"And so we must make this sector attractive to investors and to lenders. So for us to attract investors,and investment, we must make the sector attractive, and the only way it can be made attractive is that there must be commercial pricing.
"If the value is still at N66 and the government is not paying subsidy, the investors will not come. But now that we have increased the tariff for A Band, there is interest shown by investors," he said.
Nigeria owes N300 billion electricity subsidy
Mr Adelabu also told the lawmakers that the federal government owes about N300 billion for electricity subsidy.
"There has not been funding for this subsidy. And this has culminated into each debt yearly now for the operators in the industry, especially the generating companies and the gas supply companies.
"As of the last estimate, we said 1.3 trillion naira is being owed to the five generating companies, while the legacy debt of the gas supply companies stood at $1.3 billion in 2023.
"The total tariff, the total subsidy for the tariff, was supposed to be N720 billion. The government only funded N400 billion living in total of over 300 billion brought forward to 2024. And at the current pricing regime, we estimated that it will retain the tariff at current rates" he added.
The minister said the high level of indebtedness forced the government to remove subsidies on electricity and thereby increase the electricity tariff as announced by the Electricity Regulatory Commission (NERC).
He said, "We made it a conditional tariff, we made it a service reflective tariff, that the only condition that can make a discriminate company charge the new tariff of N225 per kilowatt hour is they must ensure they supply a minimum of 20 hours to that consumer every day. If they cannot sustain this within a period of seven days, such consumers must be granted to the old tax."
Tracking electricity supply
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Mr Adelabu said the government will track and monitor the electricity distribution companies to ensure supply of electricity for 20 hours to consumers under Band A.
He said defaulting distribution companies will be fined.
The minister specifically said a particular Disco was awarded a penalty of N200 million for not supplying electricity N20 hours electricity to consumers despite charging them.
"Any consumer that can get supply for 20 hours, they can pay N225 per kilo as against the N66 in the old regime. And we also put in some monetary and tracking framework to ensure that these posts are compelled to comply with this tariff order.
"And this was displayed in the first day or the first week of this new regime, when it was discovered that a particular DisCo was not supplying for up to 20 hours and was charging the customers. A penalty of N200 million was slammed on this DisCo.
"This did not only make that decision to start complying, but it also compelled other DisCo not to charge those customers that cannot enjoy supply of the new regime."
