Power sector needs N3.2 trillion subsidy for reversal of electricity tariff – NERC boss

About N3.2 trillion subsidy would be needed to be provided by the Federal Government of Nigeria in 2024 for the recent electricity tariff to be reversed, according to the Chairman of the Nigeria Electricity Regulatory Commission, NERC, Sanusi Garba.

This he says was due to inadequate investments in the power sector, noting that it was not enough to guarantee steady power supply across the country.

Mr Sanusi stated these at a stakeholders meeting with member of House representative Committee on Power at the National Assembly in Abuja recently.

He further said, if nothing is done to address issues of power sector including foreign exchange fluctuation and non-payment for gas, the sector will be heading for doom, stressing that 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.

According to him, the 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.

NERC boss raised alarm of what he called a 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 and January 2023, tariff increased from 55 percent of cost to 94 percent of cost recovery, adding that “the unification of FX and current inflationary are pushing cost reflective tariff to N184/kwh:

“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.”Mr Sanusi explained”.

Garba also says, the only N185 billion of 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 tarrif 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 and 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.