Nigeria Needs N3.2trn Subsidy To Reverse Electricity Tariff Hike-NERC

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Mohammed Shosanya

Nigerian government would need N3.2 trillion to subsidise electricity in 2024 if the recent increase in electricity tariff is to be reversed,the Chairman of the Nigeria Electricity Regulatory Commission (NERC),Sanusi Garba,has said.

He stated this at a one-day stakeholders meeting organized by the House of Representatives Committee on Power on Thursday in Abuja.

According to him,the current investments in power sector was not enough to guarantee a steady power supply, adding that if nothing concrete is done to address issues in the sector including foreign exchange fluctuation and non-payment for gas, the sector will be heading for doom.

He stated that before the recent review in tariff, electricity distribution companies were only obligated to pay 10 percent of their energy invoice, and the lack of cash backing for subsidy is creating a liquidity challenge in the sector.

He explained that as a result of the non-payment of subsidy, gas supply, and power generation have continued to dip, most especially the continuous decline of generation and system collapse are largely linked to liquidity challenges.

Mr Garba said that between January 2020 and January 2023, the tariff increased from 55 percent of the cost to 94 percent of cost recovery.

According to him, the unification of foreign exchange and current inflationary pressures are pushing cost reflective tariff to N184/kWh.

“If sitting 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″, he stated.

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.

Chairman of the House Committee on Power, Rep. Victor Nwokolo, earlier in his address said the essence of the meeting was to address the recent increase in tariff and the issue of band A, among others.

He disclosed that the officials of NERC and DISCOS have given the committee useful Information.

He said: “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 in 2022, the industry lacks the capital to bring the needed change.

“Of course, with the population explosion in Nigeria, the areas being covered are 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 are 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 the committee level. There must be a House resolution to stop it.

“That is why we are 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 timeline 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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