The Minister of Power, Works and Housing, Babatunde Fashola, on Tuesday offered reasons behind the resolve by Federal Government to increase electricity tariff. He said the increment was meant to attract investors into the Power sector in Nigeria since only a few among them were willing to invest in the sector, hitherto.
Fashola said this during a budget defense by his ministry before the Senate Committee on Power.
He said investors were already indicating resolve to pull out of the power sector with signs that they were not going to get returns on their investments.
The Minister who said the Ministry had secured the endorsement of the National Assembly on tariff increase, adding that the Ministry would continue to widen the scope of the power sector in Nigeria.
He said, “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 can’t we 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?
“So it is not what I want, it is what I think will solve the problem, everybody is owing everybody in the power equation and they are also owing banks.
“Now if you want investment in power, banks must continue to see confidence to lend.
“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 there were lots of people producing excess power, who also want to join the national grid if the price was right.
Fashola expressed regrets that the issue of the tariff was handled with levity by successive governments which it said were afraid to take concrete decision on planned increment.
Fashola said 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.
Said he, “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.
The Minister, advised that the tariff increment will necessitate consumers to be more prudent in the use of electricity while always mindful of switching off all appliances that are not of immediate use.