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Minister Adelabu: Nigeria Must Rethink Electricity Subsidies, Urges Tariff Reform Amid Financial Strain

February 14, 2024

Photo Credit: Tribune Online

 

Minister of Power, Adebayo Adelabu, has underscored the urgent need for Nigeria to transition from electricity subsidies to a sustainable tariff structure. Addressing reporters in Abuja on Wednesday, Adelabu emphasized the necessity of implementing a cost-effective tariff model due to mounting financial obligations, including a staggering debt of N1.3 trillion owed to Generating Companies (GenCos) and $1.3 billion owed to gas suppliers.

Highlighting the stark disparity between allocated funds and actual subsidy requirements, the Minister disclosed that only N450 billion was earmarked for subsidy this year, falling significantly short of the estimated N2 trillion needed to sustain the subsidy program.

In a strategic move to decentralize power generation, Adelabu announced plans to authorize State Governments to independently produce electricity for localized distribution within their respective territories. This initiative aims to enhance energy self-sufficiency and reduce reliance on centralized power systems.

Delving into the root causes of recent grid collapses, Adelabu attributed the incidents to multiple factors, including gas shortages, aging infrastructure within the grid network, logistical constraints in power evacuation, and the deliberate sabotage of power plants in specific regions, notably the northeastern geopolitical zone.

Addressing challenges within the Transmission Company of Nigeria (TCN), the Minister revealed that over 100 projects remain incomplete due to discrepancies in contract valuations exacerbated by forex fluctuations. As a corrective measure, the TCN will prioritize the completion of existing projects before initiating any new contractual agreements.

Looking ahead, the 2024 budget allocates a substantial sum exceeding N50 billion towards the establishment of localized grid systems. These grids are designed to provide electricity to isolated communities, underscoring the government’s commitment to extending reliable power access to underserved areas across the nation.

 

Credit: The Nation

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