In December, Government will cease N200 billion annual electricity subsidy.
By the end of the year, the Federal Government hopes to have resolved the electricity sector’s annual tariff shortfall of N200 billion.
Between 2015 and 2020, the shortfall was estimated to be at N2.4 trillion, with an annual average of N200 billion. The shortage was caused by reduced electricity consumption prices.
As a result, Nigerians may be forced to pay the true cost of electricity consumed starting in December of this year.
Emerging issues, particularly insecurity, are already frustrating the sector, according to the Nigerian Electricity Regulatory Commission (NERC).
According to the Secretariat of the Power Sector Recovery Programme (PSRP), the government believes the tariff gap would be resolved by the end of the year.
Zainab Ahmed, the Minister of Finance, Budgets, and National Planning, previously stated that the Federal Government has quietly abolished all subsidies in the power sector, with a plan to phase down subsidies on gasoline over time.
“We’re de-subsidizing our subsidies.” We suffered a setback; we were supposed to abolish the fuel subsidy by July of this year, but the polity objected strongly. We had elections coming up, and we also believed that the moment was not ideal because of the difficulty that businesses and residents faced during the COVID-19 outbreak, so we backed off.
“However, we have been able to quietly remove subsidies in the electricity sector, and we currently do not have subsidies in the electricity sector.” “We achieved this over time by carefully adjusting prices at some levels while keeping lower levels low,” Ahmed explained.
“We are aiming for the tariff shortfall to go away by the end of the year,” said Balije Madu, a member of the PSRP Secretariat, speaking during a media workshop.
Despite recent issues in the country’s power capacity, Madu claims that the administration has managed to keep the grid running at around 4,500 megawatts.
Madu recognised that the sector remained at a fundamental level nine years after it was privatised, and that expectations from the sector needed to be trimmed.
According to him, the capability expected from the industry may stay illusive unless the basis is adequately constructed.
The inability to fix sufficient tariffs, according to NERC Chairman Sanusi Garba, has caused problems for distribution businesses. He went on to say that the development had an impact on the distribution businesses’ financial viability.
“A lot of things happened relating to the financial viability of the DisCos,” he explained, “because if tariffs were static and they had inflation and FX issues, distribution companies would have revenue under-recovery.”
Garba acknowledged that the circumstance had to have hampered the companies’ ability to raise essential financing and cover operating costs.
Garba stated that a lot needs to be done to help the DisCos out of the current quagmire, as banks are already at odds with most of the DisCos as well as the Nigerian Bulk Electricity Trading Company over their failure to pay back loans and repay billed payments.
According to him, the utility’s concerns include not only financing, but also governance, capacity, and other factors.
“The challenges are made more difficult by the country’s position. “A number of the DisCos are being impacted by security issues and a variety of other factors that are affecting their capacity to deliver service or even recover revenue,” Garba said.
He stated that the PSRP was launched by the Federal Government with the backing of the World Bank in order to improve access to adequate, dependable, and cheap energy in Nigeria.
“About one million metres were installed at phase zero of the NMMP,” he said, recalling one of the Federal Government’s policy initiatives, the National Mass Metering Programme (NMMP). As soon as the procurement procedure is completed, phase one of the NMMP, which calls for the installation of four million metres, will begin. Performances have also been submitted by DisCos.”
Enugu Electricity Distribution PLC (EEDC) told The Guardian that insecurity in its franchise area has had a negative impact on not only revenue and collection, but also overall performance, with revenue down by roughly 40%.