CEM REPORT, ENERGY | The Nigerian Electricity Regulatory Commission (NERC) has announced the approval of new electricity tariffs, a move anticipated to significantly reduce the government’s subsidy burden for the 2024 fiscal year. According to NERC’s Vice Chairman, Musliu Oseni, the new tariffs are expected to cut down the subsidy by approximately ₦1.14 trillion.
This decision comes amidst the government’s ongoing efforts to reform the electricity sector and create a more sustainable market. The current system relies heavily on subsidies, which have placed a strain on government finances.
Targeted Subsidy Regime and Protecting Vulnerable Customers
While announcing the new tariffs, Oseni emphasized the government’s commitment to protecting vulnerable consumers. He stated that the new regime aims to transition towards a “targeted subsidy regime” to lessen the impact of these economic changes on those who need it most.
“With the newly approved tariffs, subsidies for the 2024 fiscal year are expected to reduce by about ₦1.14 trillion in furtherance of the Federal Government’s realignment of the subsidy regime,” Oseni explained in a statement. “While largely protecting vulnerable customers and fostering investments targeted at providing efficient service delivery in the Nigerian Electricity Supply Industry (NESI).”
Focus on Financial Sustainability and Improved Service Delivery
The NERC’s primary objective in approving these revised tariffs is to establish a financially viable electricity market. This, in turn, will enable the sector to provide adequate and reliable power supply, which is crucial for driving economic growth in Nigeria.
“The overarching objective of the commission in the consideration of the tariff application is the creation of a financially sustainable electricity market providing adequate and reliable power supply to drive the Nigerian economy,” Oseni said.
NERC Transparent Review Process and Holding DisCos Accountable
Oseni elaborated on the transparent process undertaken by the commission while reviewing the tariff proposals submitted by the 11 Electricity Distribution Companies (DisCos). He explained that NERC adhered to its established regulations and business rules throughout the evaluation.
This process included a thorough examination of the DisCos’ performance improvement plans, along with a public hearing where stakeholders and citizens had the opportunity to scrutinize the proposed rate changes.
“The commission undertook a detailed assessment of the tariff proposals submitted by the 11 Electricity Distribution Companies (DisCos), adhering to its established regulations and business rules,” Oseni highlighted. “There was an examination of the performance improvement plans of the licensees, which also encompassed a public hearing.”
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Furthermore, Oseni assured that a mechanism for enforcement and compensation has been established to address service failures. This implies that DisCos will be held accountable for delivering the promised level of service to consumers.
“All DisCos have been provided with mandatory targets for investments and migration of more customers to Band A. The commission has established a robust monitoring framework leveraging on technology to ensure that the public has visibility of the service covenant with their service providers,” he added.
Looking Ahead
The NERC remains committed to collaborating with policymakers to ensure Nigerians have access to adequate and reliable electricity. This aligns with the goals outlined in the Electricity Act 2023, which aims to transform the sector for the benefit of all citizens.
“We wish to assure all Nigerians that the commission working in collaboration with the policymakers remains committed towards providing adequate and reliable electricity to all citizens,” Oseni concluded. “This is as we work diligently with state governments to deliver on the gains of the Electricity Act 2023.”
The implementation of these new tariffs is a significant step towards a more sustainable electricity market in Nigeria. While some subsidy reduction is expected, the government’s focus on protecting vulnerable consumers and ensuring improved service delivery offers a promising path forward for the sector. Nigerians can expect continued collaboration between NERC, policymakers, and DisCos as they work towards achieving a reliable and efficient electricity system.