Electricity tariffs reflect 40% losses, inefficiencies — Presidential aide

The former Minister of Power and Special Adviser to the President on Power, Lanre Babalola, has warned against making electricity consumers bear the cost of inefficiencies in Nigeria’s power sector, arguing that reducing operational losses could help lower tariffs without compromising reliable supply.

Babalola said electricity tariffs should not automatically be considered cost-reflective simply because they are high, stressing that the costs incurred by operators must be examined to determine whether they reflect efficient operations or losses within the system.

He spoke at the third edition of the Abuja Policy Lab, organised by the German Embassy in Nigeria, with the theme, ‘Fueling the Future: How to Power Nigeria’. The panel was moderated by the embassy’s political officer, Lorena Mohr, according to a statement issued on Wednesday.

Responding to a proposition that Nigerians needed reliable electricity rather than cheap power and should accept higher tariffs in exchange for improved supply, Babalola said he agreed that reliability was essential but rejected the assumption that cost-reflective electricity must be expensive.

“I agree with half of it. And the other half, I disagree with. Now, first of all, let me take the part that I agree with, which is probably easier for us before we start. Without a doubt, Nigerians need reliable power. We don’t need cheap power, as long as the power comes to you,” he said.

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He added, “It might be nice in principle, but what customers actually need is reliable power. I think there’s no contestation over that issue. Without that power, there are no factories. There’s discomfort at home.”

However, the former minister, who said he spearheaded the development of Nigeria’s Multi-Year Tariff Order, argued that the sector’s operational weaknesses had contributed to the high cost of electricity.

Babalola cited aggregate technical, commercial and collection losses of about 40 per cent, alongside inefficiencies in electricity production, as factors contributing to the cost passed on to consumers.

He said electricity prices of about N200 per kilowatt-hour, equivalent to approximately 15 US cents, were already high by international standards, making it necessary to establish how much of the cost resulted from inefficiencies.

“If we assume for a second that, let’s say, N200 per kilowatt-hour, which is the band-A price, is cost-effective, and that’s about 15 cents per kilowatt-hour. You shouldn’t forget that 15 cents everywhere in the world is pretty high,” he said.