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Power Minister Adelabu gives reasons Tinubu-led govt should remove electricity subsidy

Minister of Power, Adebayo Adelabu, has proposed that
President Bola Tinubu’s administration ensure removal of electricity subsidy
for effective utilisations of energy in the country.

 

Adelabu said this while expressing concerns over the poor
electricity supply situation in the country caused by numerous issues including
outstanding subsidy debts.

 

He advocated that Nigeria should migrate to a full
cost-reflective tariff regime if the federal government cannot pay for
subsidies owed to the market.

 

The minister disclosed these on Wednesday when he visited
the 750 megawatts (mw) Olorunsogo Power Generating Plant in Ogun State and the
500mw Omotosho Generating Plant in Ondo State as part of his nationwide
inspection visit to power installations of the federal government.

 

Adelabu also stated that the National Independent Power
Plants (NIPPs) being operated and managed by the Niger Delta Power Holding
Company Plc (NDPHC) were currently suffering under-capacity utilisation of
below 25 per cent due to gas supply constants.

 

“We have been to Olorunsogo and we are now in the Omotosho
Power Plant. These are big power plants. I am impressed with the size and the
technology of the power plants here. Their operational history is also
impressive,” he said.

 

“And I am amazed at the level of underutilisation of these
power installations. Each of them operates below 25 per cent capacity, when we
are still complaining that power generation is low in this country. The
under-capacity utilisation is due to a variety of reasons.

 

“The major part of it is the shortage in gas supply to these
installations, which is why I needed to see these plants myself, to look at
what can we do to improve the operational capacity of these plants.

 

Turbines

Speaking about turbines to generate more power for the
country, he said, “What can we do to support these power plants to operate at
impressive capacity, so that power supply will improve nationwide?”

 

He said he would later engage with the management of the
power companies to effective means of partnership and cooperation such that the
federal government could support them to improve their operational capacity,
and consequently improve the level of power supply to the distribution
companies.

 

He also observed that the government-owned generating
companies were currently undervalued, arguing that a number of works needed to
be done on them by the government to bring them back to higher capacity and
improved valuation before they could be sold.

 

Adelabu said if the plants were sold in their current state,
the country would be losing, maintaining that Nigeria had invested so much in
those power installations that have only existed for 12 years.

 

In dealing with the gas supply challenge, the minister said
there was a need for a roundtable meeting and collaboration with the Minister
of State for Petroleum (Gas) in order to ensure that gas supply to the Gencos
was regular, and ultimately solve the issue of under capacity utilisation of
the plants.

 

Removing electricity
subsidy

Having said this, Adelabu said Nigeria should migrate to a
full cost-reflective tariff regime if the federal government cannot pay for
subsidies owed the market.

 

He said, “And we also want to appeal to the federal
government that once there is a subsidy promise, it has to be fully funded. If
our government is not ready to fund electricity subsidy, it is actually better
for us to migrate to a fully-cost-reflective tariff, because liquidity is a
major issue in the sector, which has led to a huge debt being owed power
generating companies.

 

“And once they are owed, they are also unable to pay the gas
suppliers. When the gas suppliers are not paid, they will be unwilling to
supply regular gas to them.

 

“So where are these debts piling up? Where are they coming
from? Part of it are the Discos are owing some portion of these debts while the
federal government is also owing a huge portion of these debts, which relate to
the unfunded portion of the subsidy that they pledge.

 

“So, I will do everything within my capacity. I have already
had a meeting with the Honourable Minister of Finance and Coordinating Minister
of the Economy as well as the honourable Minister of Budget and National
Planning, and the Special Adviser to the President on Energy, on how we can
fund the outstanding electricity subsidy unpaid by federal government.”

 

Meeting with
co-ministers

He said the meeting with the relevant ministers would
continue on Thursday, noting that they were to discuss ways to help the power
sector through injection of the required liquidity and payment of parts of the
outstanding debts owed the generating companies.

 

Going forward, the power minister said Nigeria needed to
have a conversation on whether to pay for the real price of power, which he
said was no longer cheap.

 

According to him, throughout West Africa, Nigeria still pays
the lowest tariff for power supply, arguing that Ghana, Ivory Coast, Niger and
the likes pay almost more than double of Nigeria’s electricity tariff.

 

“So, if the government is insisting on continuing with the
subsidy, then it has to be funded, so that there’s no debt piling up for the
generating companies. That’s the only way out of the current power situation,”
he maintained.

 

However, Adelabu assured Nigerians of an improvement in
nationwide power supply in the coming weeks, saying the drop in supply experienced
in the past three weeks was a temporary situation and resulted from shortages
in gas supply to the power Gencos.

 

He also promised that the government would pay down a major
part of the debts owed the Gencos in the next couple of days, adding, “And I believe
that gas supply will improve to the power generating companies and power supply
to the entire nation will also improve.”

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