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Nigeria to subsidise power next year

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Abuja, Nigeria — ESI-AFRICA.COM — 14 November 2011 – Nigerian minister of power Barth Nnaji says the federal government is planning to introduce a three-year subsidy programme for the country’s power sector from the beginning of January next year.

Speaking here on the subject of “Power Generation, Transmission and Distribution,” he told the 17th Nigerian Economic Summit that the subsidy would serve as cushion to the urban poor and rural dwellers who were unable to afford the planned government hike in electricity tariffs.

Although he would not give the cost of the proposed subsidy, allAfrica.com reports that an investigation by daily newspaper “This Day” revealed that the federal government planned to earmark US$630 million in the 2012 budget for the planned subsidy in the power sector.

The Minister said: “We will have a subsidy for sure by January. Nobody will come and invest in the power sector unless you have cost-reflective tariffs, and what we have done is to solve the problem by raising the tariff now but providing subsidies to those who cannot afford to pay. That’s how it’s going to work. This current tariff has to be raised.”

Explaining how the subsidy would be administered, he said: “The subsidy goes to the distribution companies; they have certain rates for residential consumers and the commercial consumers like the banks. The distribution companies will collect much less money from poor consumers, and they’ll make up through the subsidy that would come to them.”

According to Nnaji, it is a very efficient way. “These cost-effective tariffs will ensure that we have investors coming here without which it would be extremely difficult to convince people that we are serious,” he added.

The Minister said the new tariff plan would last from 2012 to 2014 and would be suspended thereafter when there is stability.