Tue. Jan 26th, 2021

Increased Electricity Tariffs, Removal of Subsidy Key to Economic Recovery- Prof Ajayi

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Public analyst and lecturer at the Olabisi Onabanjo University, Ago-Iwoye, Prof Olawale Ajayi, has stated that the increase in electricity tariff and the removal of subsidy on the price of petrol are actions aimed at encouraging efficiency in electricity supply and finding the right pricing for fuel to in order to free the government to concentrate on providing other social amenities for the citizens.

Ajayi, who stated this on Arise TV morning programme yesterday, said deregulation would allow market forces to determine the price of petrol and improve efficiency.

According to him, “It was believed that deregulation would allow market forces to determine the price and improve efficiency. It happened in the telecom industry. The government was in charge when services were very poor, but when the private sector came in, telephony became available, cheaper and accessible, and also contributed in developing the economy.

“So deregulation will take government out of the picture and make electricity more efficient and accessible. I think we may have to go this route. The only alternative is to allow the government to start producing power but this has not worked in the past, so it is better it is given to private investors in order to have efficient electricity supply.”

The don noted that unless producers are paid the amount of money that would cover their expenses and enable them make profit, the plan to have efficient supply of electricity wouldn’t work.

Ajayi, however, said there should be subsidy for rural dwellers and low-income earners, remarking that every government gives subsidies.

“But what are you subsidizing? Let’s go back to the blue print and get pro-poor subsidy so that the poor and marginalised should benefit while those that can pay should pay. More efficient producers will come in and competition will drive down the prices (tariffs). You can always ensure that people are not wasting resources, petroleum resources,” Ajayi said.

He said the government is beset with financial challenges occasioned by the COVID-19 pandemic, which crashed oil prices, so there is really nowhere to get the needed funds than to bring in the private sector.

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