FG to pay N3.2 trillion as electricity subsidy if tariff increase is reversed - NERC - NEWS FRONTIER DAILY


Thursday, April 18, 2024

FG to pay N3.2 trillion as electricity subsidy if tariff increase is reversed - NERC

Chairman of the Nigeria Electricity Regulatory Commission (NERC), Sanusi Garba has said that the Federal government would have to pay the sum of N3.2 trillion as subsidy for the electricity sector in 2024 if the recent increase in tariff is to be reversed. 

Speaking at a stakeholders meeting called by the House of Representatives committee on Power, Garba said that current investments in the sector was not enough to guarantee steady power supply. 

According to him, if nothing concrete is done to address issues in the sector including foreign exchange Fluctuation and none payment for gas, the sector will be heading for doom. 

He explained that prior to the recent review in tariff, DISCOS were only obligated to pay 10 percent of their energy invoice, adding that the lack of cash backing for subsidy is creating a liquidity challenge in the sector. 

He said further that as a result of the none payment of subsidy, gas supply and power generation have continued to dip, adding that the continuous decline of generation and system collapse are largely linked to liquidity challenge. 

He raised an alarm of what he called a looking risk not total shut down by the Generation and distribution companies, achieving cost effective tariff is key to the sustainability of the sector. 

He further explained that between January 2020 abe January 2923, tariff increased from 55 percent of cost to 94 percent lt cost recovery, adding that "the unification of FX and current inflationary pressures and are pushing cost reflective tariff to N184/kwh

He said "if seating back and doing nothing is the way to go, it would mean that the National Assembly and the Executive would have to provide about N3.2 trillion to pay for subsidy in 2024."

Garba also said that only N185 billion of the N645 billion subsidy in 2023 has been cash backed, leaving a funding gap of N459. 5 billion. 

Vice Chairman  of NERC, Musiliu Oseni who also justified the recent increase in tariff said the increment was needed to save the sector from total shutdown. 

Chairman of the House Committee on Power, Victor Nwokolo (PDP, Delta) said the essence of the meeting was to address the recent increase in tariff abd the issue of band A and others. 

Nwokolo said the officials of NERC and DISCOS  have given the committee useful Information, adding "we have not concluded with them because the Transmission Company of Nigeria were not here and the Generation Companies too. 

"We will hold further consultations with them by next week. But from what they have said which is true is that without the change in tariff, which was due since 2022, the industry lack the capital to bring the needed change. 

"Of course, with the population explosion in Nigeria, the areas being covered is beyond what they have estimated in the past and because they need to expand their own network, they also needed more money. 

"Every day, there are changes to the exchange rate and there is also threats to power installations because of security, thereby increasing the overhead. 

"The committee has not fully agreed with them because we are not saying either yes or no because we want to get more input and also find out the possibility of gas being sold to them in naira. More of this is dependent on generation and without the gas, you cannot have power. 

"The committee cannot take any decision to stop the increase in tariff. That decision can only be taken by the entire House and not at committee level. There must be a House resolution to stop it. 

"That is why we happy that the House is not seating next week as that will afford us an opportunity for wider consultation so that we know what yo present to the entire House. We are interested in the time line for improvement in service delivery because what Nigerians want is service delivery because light will take care of our security challenges and many other things"

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