NERC’s move is driven by the need to stabilize the electricity sector, making it more attractive for investment and reducing the reliance on government support. The current subsidy regime, which once amounted to as much as ₦600 billion annually, is being gradually reduced. For 2024, the subsidy is expected to be cut by about ₦1.14 trillion, signaling a shift towards a targeted subsidy system aimed at protecting vulnerable consumers while ensuring the financial health of the sector.
The commission’s plan also includes a transition to a bilateral model, where electricity distribution companies (DisCos) will negotiate prices directly with consumers, leading to more market-driven pricing. This shift is intended to improve service delivery and accountability within the sector, ensuring that DisCos meet performance targets and provide reliable electricity supply.
The stabilization fund, a government intervention designed to cushion the impact of market imperfections on electricity consumers, has been a critical component of the Nigerian power sector. Its removal could lead to significant financial pressures on DISCOs, which may pass on these costs to consumers in the form of higher tariffs.
While the NERC has not officially confirmed the plans to eliminate the stabilization fund, industry experts believe that such a move is imminent. The transition to a bilateral electricity market model, where power generation, transmission, and distribution companies negotiate electricity prices directly, is seen as a key step towards improving the efficiency and financial viability of the sector.
However, this change is not without its challenges. The increase in tariffs and the removal of subsidies are likely to raise concerns among consumers, especially those who are already struggling with high living costs. NERC has assured that mechanisms are in place to protect the most vulnerable consumers during this transition​.
Meanwhile, consumer advocates have raised concerns about the potential impact of these changes on Nigerians who are already burdened by high living costs. They argue that the government should prioritize measures to improve electricity supply and reduce losses before increasing tariffs.
The proposed reforms have sparked intense debate among stakeholders, with power sector experts divided on the likely outcomes. While some believe that the elimination of the stabilization fund and the introduction of a bilateral market could lead to improved service delivery, others caution that it could exacerbate the challenges faced by consumers.
As the situation unfolds, consumers are urged to monitor developments closely and prepare for potential increases in their electricity bills. Stay tuned………..
