The N900 billion planned electricity subsidy by the Federal Government should target vulnerable Nigerians, according to George Etomi, Chairman of Wister and Gas.
In an interview with CNBC Africa, Etomi said that while subsidies are not new, they must be well-directed and ideally benefit the most disadvantaged electricity consumers.
He noted the government plans to subsidize power in December 2023 due to economic downturn, but emphasized subsidies should not distort the sector’s economics so that investor confidence is retained.
Etomi stated that since Nigeria’s electricity market is contract-based, risk allocation should go to whoever can best bear it. Hence, if the government subsidizes the market, it should carry that risk.
However, he stressed the electricity regulator must be involved to prevent eroding market confidence. He said Nigeria’s power sector privatization has been an arduous journey towards making it fully functional.
Etomi added that existing contracts between players must not be impaired in ways that discourage investor appetite.
Earlier, Minister of Power Adelabu highlighted challenges with implementing a cost-reflective electricity tariff, revealing government still subsidizes power.
Although tariffs should have increased sooner, President Tinubu focused first on improving power supply before any hike. The subsidy bridging the gap between cost-recovery and allowed tariffs strains liquidity and investment.
Adelabu admitted avoiding tariff hikes despite causing a liquidity crisis, as the President prioritized relieving economic hardships faced by Nigerians.
The Minister said cost-reflective tariffs were necessary months ago to provide sector liquidity. But removal of fuel subsidy, forex fluctuations and high inflation made the President cautious about further burdening citizens.
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