NEWS
Electricity Tariffs Reflect 40 Percent Sector Losses, Inefficiencies – Lanre Babalola
Electricity Tariffs Reflect 40 Percent Sector Losses, Inefficiencies – Lanre Babalola
Presidential power adviser Lanre Babalola says inefficiencies and losses across Nigeria’s electricity sector contribute to high tariffs.
Aggregate technical, commercial and collection losses stand at about 40 percent, according to Babalola.
He argues that reducing operational losses could ease electricity costs without compromising reliable power supply.
October 15, () – The Special Adviser to the President on Power and former Minister of 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 high electricity prices should not automatically be considered cost-reflective, stressing that the costs incurred by operators must be examined to establish 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 under the theme, “Fueling the Future: How to Power Nigeria”. The panel discussion was moderated by the embassy’s political officer, Lorena Mohr, according to a statement issued on Wednesday.
Responding to the argument that Nigerians should prioritise reliable electricity over cheap power and accept higher tariffs in exchange for improved supply, Babalola said he agreed that reliability was essential but rejected the assumption that dependable electricity must necessarily be expensive.
Every second brings Nigerians closer to exercising their democratic right and shaping the future of our nation.
Exercise your democratic right responsibly, peacefully and lawfully.
“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.
He added that reliable electricity was indispensable for industrial activity and household comfort, noting that businesses could not operate effectively without dependable power supply.
Channel
Sector Losses Raise Questions Over Tariffs
Babalola, who said he spearheaded the development of Nigeria’s Multi-Year Tariff Order, maintained that operational weaknesses across the electricity value chain were contributing to the high cost of power.
He cited aggregate technical, commercial and collection losses of about 40 per cent, alongside inefficiencies in electricity production, as factors contributing to the costs ultimately borne by consumers.
Technical losses occur when electricity is lost during transmission and distribution. Commercial losses include electricity theft and unmetered consumption, while collection losses arise when operators fail to collect payment for electricity already billed.
These losses weaken the financial position of power-sector operators and can undermine their ability to invest in infrastructure, improve service delivery and maintain a financially sustainable electricity market.
Babalola argued that the costs associated with these inefficiencies should be examined before electricity tariffs are accepted as genuinely reflective of efficient operations.
He cited a tariff of about ₦200 per kilowatt-hour for Band A customers, equivalent to approximately 15 US cents per kilowatt-hour, and said the price was already high by international standards.
“If we assume for a second that, let’s say, ₦200 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.
Efficiency Key To Sustainable Electricity Pricing
A representation of Electrical Transmitters Photo credit Business Post
The former minister’s argument centres on whether consumers are paying for the efficient production and delivery of electricity or also absorbing the cost of avoidable losses across the value chain.
Reducing technical and commercial losses, improving revenue collection and addressing inefficiencies in generation and distribution could strengthen operators’ finances while easing some of the cost pressures feeding into tariffs.
However, achieving these improvements would require sustained investment in electricity infrastructure, better metering, stronger revenue collection and improved operational management across the sector.
The challenge for policymakers and industry operators is to reduce avoidable costs while ensuring that power companies retain sufficient revenue to maintain infrastructure, expand supply and deliver reliable electricity to households and businesses.
Babalola’s remarks highlight the distinction between cost-reflective tariffs and tariffs inflated by inefficiency. His position suggests that sustainable electricity pricing should depend not only on recovering legitimate costs but also on improving the efficiency with which power is generated, transmitted, distributed and paid for.
DO YOU WANT TO WHISTLEBLOW, REPORT FRAUD, THEFT OR INJUSTICE OR INTIMIDATION? SEND US YOUR STORY/REPORT TO NEWSDESK@MEDIATODAY.NG
