The Nigerian government on Tuesday defended the increment in electricity tariff, saying that it would improve power supply across the country.
The Minister of Power, Works and Housing, Mr. Babatunde Fashola, who spoke after defending the budget of the ministry before the Senate Committee on Power, said that investors would pull out if they were not able to get returns on their investment.
The new electricity price tariff announced by NERC took effect from Monday.
He said that the Senate had empowered the Nigerian Electricity Regulatory Commission (NERC) to determine tariffs for electricity and as such, the increment was not unlawful.
“Electricity is a product, it is made from raw materials and some of the raw materials are gas. So, the issue of tariff is the single issue of price, when the raw materials of course will go up, the price cannot stay the same. You may ask why we can’t have more power before the price goes up. I am also a consumer, but we see that investments in power are not where they should be.
If the recovery of price, the income and profit do not make economic sense to the investor, would you do that business if you are the one? There are a lot of investors who want to pay a little more than the open market tariff, if we want them to come into the industry we have to allow the new tariff order,” he said.
The Minister said that there were lots of people producing excess power, who also want to join the national grid if the price was right. He explained that the tariff was necessary as the former government was perhaps afraid to confront Nigerians with the real price of electricity, hence the increment in tariff every two years.
Mr. Fashola however assured that the new tariff was a ten-year policy that would not be reviewed upwards or downwards except if prices of raw materials went remarkably high or low.
“This tariff order also removes fixed charges, the consumers say they do not want fixed charges: nobody likes fixed charges because they want to pay for what they use. So, it gives the consumer something and it gives the service provider something too so that we can see increment. Government has bought out the issue of generation of power so people will not go into generation of power if it is not a business from which they can make a recovery and some profit.
The law passed by the National Assembly clearly gives NERC the responsibility and power to give a tariff that enables them to recover their investment and returns on investment. So nothing unlawful or illegal has happened, one thing we must however begin to embrace is conservation,” he said.
Earlier, during his presentation to the Senate Committee, the Minister assured Nigerians that no project which was still at its design stage would be included in the 2016 budget for funding.
He said that it was obvious that any project that had not already been designed would not be achievable even if it is captured in the budget.