(Ecofin Agency) - The Nigerian government has announced plans to remove electricity subsidies for 15% of consumers, aiming to reduce the subsidy cost by 3.3 trillion naira ($2.6 billion). This move is part of a series of reforms designed to alleviate the strain on public finances, according to Bayo Onanuga, the presidency's spokesperson, on Tuesday, April 2, 2024.

"The government was under pressure to allow a price increase in the electricity sector as it only budgeted 450 billion naira for the subsidy this year," Onanuga stated. He further explained that the proposed price increase would help sector companies cover their operational expenses and make new investments.

"With the huge subsidy burden and high cost of gas ... the current electricity tariff is not realistic,," he emphasized, noting that the last rate revision occurred in 2020. Onanuga also mentioned that 15% of consumers, accounting for 40% of electricity consumption, would be affected by the price hike.

Since taking office on May 29, 2023, Nigerian President Bola Tinubu has launched several bold reforms, including the removal of fuel subsidies and the unification of the national currency exchange rate, to boost growth in Africa's largest economy.

Nigeria's electricity sector faces numerous challenges, including a failing transmission network, gas shortages, high debts among production and distribution companies, and vandalism targeting infrastructure. The country has an installed capacity of 12,500 megawatts but produces only about a quarter of it, leading a significant portion of the population and businesses to rely heavily on expensive diesel generators.