Nigeria Needs Much Higher Power Prices, President's Adviser Says

Nigeria’s power prices need to rise by about two thirds for many customers to reflect the cost of supplying it and an increase can be expected within months, President Bola Tinubu’s special adviser on energy said.

Higher electricity tariffs, which need to be balanced by subsidies for less-affluent consumers, are required to fund the maintenance needed to improve reliability and to attract private investors into power generation and transmission, said the adviser, Olu Verheijen.

“One of the key challenges we’re looking to resolve over the next few months is transitioning to a cost-efficient but cost-reflective tariff,” Verheijen said in an interview in Dar es Salaam, Tanzania, this week. This is needed “so the sector generates revenue required to attract private capital, while also protecting the poor and vulnerable,” she said.

Tinubu has already taken a number of steps to ease the burden on state finances and encourage private investment since taking office in May 2023, including removing subsidies on motor fuel. Power prices were already tripled for some customers last year.

While Nigeria, a nation of about 237 million people, has an electricity access rate of around 62%, an erratic grid supply limits productivity and disrupts daily life.

The move to raise tariffs comes amid mounting pressure from Nigeria’s debt-burdened electricity distribution companies for tariffs to be cost-reflective so they can improve their finances.

The country privatized generation and distribution in 2013, yet prices set by the government’s Nigeria Electricity Regulatory Commission don’t cover the suppliers’ costs. Government subsidies cover some of the difference, but profitability is hard to achieve.

Verheijen was in Tanzania attending a World Bank-backed conference where Nigeria presented a $32 billion plan to boost electricity connections by 2030. Private investors are expected to contribute $15.5 billion and the rest will come from public sources, including the World Bank and African Development Bank.

Nigeria’s power industry needs significant investment to achieve its development aims, Verheijen said. Of the country’s 14 gigawatts of installed power, only 8 gigawatts can be transmitted around the country and just four or five gigawatts can be directly delived to homes and businesses, she said.

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Siemens AG is working with the government on a $2.3 billion project to improve transmission and distribution, while more than 7 million Nigerians in rural areas have been given access to power via decentralized renewable projects.

“Your energy policies have to be closely linked with your own ambition for your country,” Verheijen said.“ Our own ambition is to be a $1 trillion economy in five years and to move to an upper-middle income country in 25 years.”

Nigeria’s gross domestic product is currently just under $200 billion, according to the International Monetary Fund.

By Antony Sguazzin, Bloomberg

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Nigeria union rejects telecom tariff hike, plans nationwide protest

Nigeria's main labour union has rejected a government-approved 50% hike in telecommunications tariffs and announced plans for a nationwide protest on Feb. 4.

The telecoms regulator last week approved the increase in mobile tariffs, the first such hike in more than a decade, bowing to pressure from operators struggling with surging costs amid high inflation and currency devaluation.

In a meeting of the Nigeria Labour Congress (NLC) late on Wednesday, union leaders called the increase "insensitive, unjustifiable, and a direct assault" on citizens already grappling with the worst cost-of-living crisis in a generation caused by reforms instituted by President Bola Tinubu.

"The rally will serve as a warning on the dangers of imposing such an unfair increase on a struggling population, NLC President Joe Ajaero said in a statement, citing high food costs and hikes in the prices of petrol and electricity.

The union demanded the immediate suspension of the tariff adjustment and called for dialogue between the government, the regulator and union leaders.

Ajaero threatened a nationwide boycott of telecommunications services and a possible strike if authorities refused to engage in dialogue.

The NLC, representing millions of workers, has repeatedly clashed with the government over economic reforms which it says exacerbate poverty, but officials argue the measures are necessary to stabilise the economy.

By Camillus Eboh, Reuters

Nigeria's petrol imports reach 8-year low as Dangote refinery expands

Nigeria's petrol imports have reached their lowest level in eight years, as the country’s new mega-refinery reduces reliance on foreign suppliers and strengthens fuel independence.

According to data compiled by Bloomberg from analytics firm Vortexa Ltd., shipments to Nigeria averaged around 110,000 barrels per day between January 1 and 24.

If this pace continues throughout the month, imports, predominantly from Europe, will hit their lowest point since 2017.

“A large part of the slowdown in Nigeria’s gasoline imports is due to the ramp-up of the Dangote refinery,” Vortexa analyst Samantha Hartke said. “Northwest Europe will have to find alternative homes for its gasoline supplies.”

The refinery has been dubbed a game-changer for Nigeria, which has long depended on gasoline imports. The refinery has been hailed as a key step in reducing the country’s reliance on foreign supplies.

The $20.5 billion Dangote refinery, owned by Africa's richest man, has a processing capacity of 650,000 barrels per day, making it the largest refinery in Africa.

It also surpasses Europe's 10 largest refining facilities, including the Pernis Refinery, which has an installed capacity of 404,000 barrels per day (bpd).

According to the Organisation of the Petroleum Exporting Countries (OPEC), Dangote's oil push in Nigeria is starting to disrupt the European oil market.

Economists suggest that the Dangote refinery could potentially end the long-standing gasoline trade from Europe to Africa, which is valued at $17 billion annually.

By Adekunle Agbetiloye, Business Insider Africa

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