State governments in Nigeria are gearing up to phase out electricity subsidies in their regions, following the approval of the Electricity Act 2023. The Nigeria Governors’ Forum has submitted a document to the Federal Ministry of Power, outlining the states’ intention to introduce varying electricity tariffs within their respective regions. This move is aimed at ensuring that consumers pay the true cost of electricity, rather than relying on subsidies that have been deemed inefficient and ineffective.
States governments believe that electricity subsidies have not improved the quality and reliability of service, but have instead been used to cover inefficient costs and lack of service by distribution companies, transmission companies, generation companies, and gas producers. The subsidies have also been criticized for only benefiting customers who are connected to the national grid, while millions of households in underserved and unserved communities pay more than twice the average true cost of on-grid supply.
State Governments: New Tariff Structures to Be Implemented
State governments are proposing new tariff structures that will reflect the true cost of electricity, with the aim of reducing and eventually eliminating subsidies over time. The proposed tariff structures will be based on a cost of service analysis, which will be conducted by each state to determine the cost of supply and arising electricity subsidies for each state. State governments are also proposing a joint framework with the Federal Government for administering future electricity subsidies in a state electricity market.
The new tariff structures will ensure that consumers pay a fair price for electricity, while also ensuring that the electricity market is viable and sustainable. The states believe that this approach will encourage investment in the power sector, improve the quality and reliability of service, and provide access to electricity for all Nigerians.
State Governments: Electricity Subsidies Deemed Inefficient and Ineffective
State governments have criticized electricity subsidies for being inefficient and ineffective, and for not improving the quality and reliability of service. The subsidies have been in place for over 15 years, but have not achieved their intended purpose. Instead, they have been used to cover inefficient costs and lack of service by distribution companies, transmission companies, generation companies, and gas producers.
State governments believe that the subsidies have also created a culture of dependency, where consumers expect to pay a subsidized price for electricity, rather than the true cost. This has made it difficult for the power sector to be viable and sustainable, and has discouraged investment in the sector.
State Governments Seek to Take Control of Electricity Markets
State governments are seeking to take control of their electricity markets, by introducing new tariff structures and phasing out subsidies. This move is aimed at ensuring that the electricity market is viable and sustainable, and that consumers pay a fair price for electricity. State governments believe that this approach will encourage investment in the power sector, improve the quality and reliability of service, and provide access to electricity for all Nigerians.
State governments are also seeking to ensure that there is no discrimination in implementing electricity subsidies, against states and regions, especially states and regions with more efficient electricity markets. They believe that continuing electricity subsidies may undermine the viability and sustainability of state electricity markets.
Federal Government Urged to Collaborate with State Governments
States governments are urging the Federal Government to collaborate with them in determining how any subsidy by the Federal Government is applied within a state electricity market. They believe that this approach will ensure that the electricity market is viable and sustainable, and that consumers pay a fair price for electricity.
State governments are also proposing a joint framework with the Federal Government for administering future electricity subsidies in a state electricity market. This framework will ensure that the subsidies are targeted and efficient, and that they do not undermine the viability and sustainability of state electricity markets.
State Governments: New Electricity Policy to Promote Investment and Access
The new electricity policy proposed by the states is aimed at promoting investment in the power sector, improving the quality and reliability of service, and providing access to electricity for all Nigerians. The policy will ensure that consumers pay a fair price for electricity, while also ensuring that the electricity market is viable and sustainable.
The policy will also encourage the development of renewable energy sources, and promote energy efficiency and conservation. The states believe that this approach will ensure that Nigeria achieves its goal of providing access to electricity for all Nigerians, and becoming a major player in the global energy market.
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