The Federal Government can no longer sustain its annual electricity tariff subsidy, the Nigeria Electricity Regulatory Commission (NERC).
The NERC Vice Chairman, Sanusi Garba who stated this, said the Federal Government spent over N540 billion on electricity tariff subsidy in 2019.
Garba called for an end to electricity subsidy, saying the huge resources spent in subsidising should be channelled to other key sectors of the economy such as health and education.
He said, “Power users should learn to pay for what they consume. This is why the commission had to provide service reflective tariffs.
“The service reflective tariff, which took effect on September 1, 2020, before it was suspended for 14 days after an agreement between the Federal Government and labour unions, will ensure that customers of distribution companies pay for what they consume.”
The NERC vice-chairman further noted that it was not in the best of the country to continue to shift the review of electricity tariff.
He said, “The time of the review has actually been shifted twice, in consideration of the exigencies that obstructed everybody, particularly the COVID-19 pandemic and other situations.
“But you cannot continue to defer the review indefinitely because you should look at electricity supply as a value chain.
“Generation companies (GenCos) are spending money to produce electricity and Transmission Company of Nigeria (TCN) is transmitting that electricity to the distribution companies (DisCos).”
He stated that electricity generation and distribution companies are being made to take a hard cut in terms of cost due to lower electricity tariffs.
“If you continue to suppress prices, somebody has to take a hard cut in terms of cost; somebody’s revenue will not be covered.
“Now what has been happening is that over the last few years, the government had been subsidising rates paid by end-users significantly. In 2019, the subsidy was something in the region of N540 billion that has been paid,” he added.
He assured that NERC would continue to work towards the sustainability of the power business in Nigeria.
He advised Nigerians to understand why it was necessary to end subsidy on electricity as well as review tariffs.
Garba said, “Yes, the government can continue, as a policy, to subsidise, but the path to the sustainability of this industry is an electricity market that is financially sustainable.
“Therefore, after the peak of the COVID-19 pandemic, it was considered appropriate to do what is right in terms of what is provided in the law and also what is in the methodology of the commission itself.
“This is because at the end of the day, the generation companies will not be paid. And if the generation companies are not paid, it means that they will not be able to pay for gas. And so the 3,000 megawatts, 4,000MW and occasionally 5,000MW that we are getting now will significantly come down.”
Comments are closed.