Assessing Nigeria’s journey to sustainable power tariff

The Federal High Court in Lagos has issued a restraining order against Ikeja Electric and the Nigerian Electricity Regulatory Commission, preventing them from implementing tariff adjustments in the April 2024 Supplementary Order on Tariff Increase On "Bank A" Feeders. This situation has sparked a debate on Nigeria's journey towards sustainable electricity tariff models. Oti Ikomi, the CEO of Proton Energy, recently appeared on CNBC Africa to share his perspective on the unfolding developments in the power sector. Ikomi emphasized the need for a clear direction in the nation's approach to pricing and models for the electricity sector. He highlighted the importance of moving towards a more efficient and liberalized market while ensuring fair returns for industry participants. Ikomi stressed the significance of balancing the interests of both power producers and consumers in the quest for sustainable electricity pricing. He pointed out the challenges faced by consumers with high tariffs but also underscored the need for investments to ensure reliable power supply. The CEO of Proton Energy called for a collaborative effort between stakeholders to address issues such as metering, asset protection, and timely bill payment to sustain the sector's growth. Discussing the potential implications of revising electricity subsidies, Ikomi echoed concerns about the substantial cost involved in such a move. The estimated 3.2 trillion Naira for reversing electricity subsidies raises questions about the financial feasibility and challenges in the current economic climate. While acknowledging the role of the federal government in tariff policies, Ikomi encouraged subnational entities to explore alternative tariff models provided under the 2023 Electricity Act. The interview also delved into the need for effective implementation at the subnational level to ensure the success of independent tariff structures. Ikomi emphasized the importance of realistic approaches to tariff models, considering the capital-intensive nature of the electricity business. He pointed out the slow progress in increasing generation capacity and highlighted the potential benefits of gradually phasing out subsidies to encourage private investments in the sector. Looking ahead, Ikomi discussed the prospects for improved generation, transmission, and distribution in Nigeria's electricity sector. He underscored the importance of transitioning to more efficient and sustainable power generation methods while addressing challenges such as transmission losses and environmental impacts. The conversation also touched on the potential impact of currency exchange rates on electricity tariffs and the government's target of reaching 6,000 megawatts of generation capacity by the end of the year. As Nigeria navigates its electricity pricing and subsidy landscape, the insights shared by industry experts like Oti Ikomi shed light on the complexities and opportunities in the country's power sector. Balancing the needs of all stakeholders and charting a path towards sustainable and affordable electricity remains a key challenge for policymakers and industry players alike.