Methodology for Future Electricity Tariffs Will Be Clear to Consumers, Says Fashola

Chineme Okafor
The Minister of Power, Works, and Housing, Mr. Babatunde Fashola, has said that the methodology for the future review of tariffs in Nigeria’s electricity market would be made clear to customers to end the prevalent suspicion about tariffs in the country.

Speaking at the recent presidential Quarterly Business Forum (QBF) in Abuja, Fashola, said there were misunderstandings about electricity tariff issues by consumers, adding that consumers do not really understand why tariffs should be cost- reflective.

He noted that the government has decided to make the processes simpler to enable consumers understand how the tariffs they pay for electricity consumption was arrived at, as well as a justification for them.

“There are issues about whether they are cost reflective. Tariff issues have also been subject to the vicissitudes of the larger economy; what was supposed to be tariff gains have been wiped out by exchange rate depreciations. And so, one of the things we are trying to do now is to re-evaluate the tariff regime in a way to see first that the methodology must be simpler; those who pay must understand how they arrived at the price and all of us must be able to say this is what the tariff is saying and it is a little complex at this moment,” Fashola said.

He also stated that the government decided to work with the World Bank to create the Power Sector Recovery Programme because it needed the support of the Bank to clear up existing operational challenges in the sector.

According to him: “It is really a series of carefully thought out policies and actions that have emanated from government’s interactions with all the players in the industry, not only as a result of my monthly meetings but also meetings at the higher levels of government which have come as feedback to us as issues challenging the industry.”

He said the programme was developed to activate and achieve the energy supplies needed to meet the economic objectives of the government which were articulated in its Economic Recovery and Growth Plan (ERGP).

“We have developed this document in collaboration with the World Bank to whom we will be looking for support, not only in terms of technical areas, but also in particular the financial support they can offer to the government side and also to the few Operators that may need financing support from the Private Sector arm of the World Bank which is the IFC,” he said.
He explained that the issues of the market debts, tariff and World Bank funding would be some of the big issues that the programme would take up.

The minister also alleged that the reversal of the tariff in 2015 by the Nigerian Electricity Regulatory Commission (NERC) had partly contributed to the huge debts of the market.

“You will all recall that at the time government directed that tariffs be reversed somebody was already producing power; somebody was producing gas, and somebody was transporting it. Who was going to carry that Can?” he asked.
He said the recovery programme would, “solve those debts, and find a way to pay them or to restructure them in a way that restores viability back to the sector so that the operators can carry on with their business.”