Reversing electricity tariff hike will cost us N3.2 trillion in subsidy payments ''“ FG

Within Nigeria Apr 19, 2024

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The Federal Government has said the reversal of the current increment in electricity tarrif will put more financial pressure on it.

The government said it would need about N3.2 trillion to subsidise and shoulder the cost of electricity this year should the recent hike be canceled.

Sanusi Garba, the chairman, Nigeria Electricity Regulatory Commission (NERC), made this known at a stakeholders meeting organised by the House of Representatives committee on power in Abuja on Thursday.

He said that the current investments in the power sector were not enough to guarantee a stable electricity supply nationwide.

He added that if nothing was done to tackle foreign exchange instability and non-payment for gas, the sector would collapse.

Garba disclosed that prior to the tariff review, Electricity Distribution Companies (DisCos) were only obligated to pay 10 per cent of their energy invoices, adding that lack of cash backing for subsidy had created liquidity challenges for the sector.

He added that the inability of the government to pay subsidy led to continuous decline in gas supply and power generation.

He said that the continued decline in the generation and system collapse were largely linked to liquidity challenges.

He said from January 2020 to 2023, the tariff was increased from 55 per cent to 94 per cent of cost recovery.

He added that the unification of FX and current inflationary pressures were pushing cost reflective tariff to N184/kWh

If sitting back and doing nothing is the way to go, it will mean that the National Assembly and the Executive would have to provide about N3.2 trillion to pay for subsidy in 2024, he said.

Mr Garba said that only N185 billion out of the N645 billion subsidy in 2023 was cash-backed, leaving a funding gap of N459.5 billion.

The vice-chairman of NERC, Musiliu Oseni, also justified the recent tariff increase, saying the increment was needed to save the sector from total collapse.

Rep. Victor Nwokolo, the chairman of the committee, said the goal of the meeting was to address the increase in tariff and the issue of band A and others.

Mr Nwokolo said the officials of NERC and DISCOS had provided useful Information to the committee.

We have not concluded with them because the Transmission Company of Nigeria is not here and the Generation Companies too.

From what they have said which is true, is that without the change in tarrif, which was due since 2022, the industry lacks the capital to bring the needed change.

Of course, the population explosion in Nigeria, is beyond what they have estimated in the past and because they need to expand their own network, they also needed more money, he said

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