BY the end of the year, the Federal Government hopes to have resolved the power 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).
The Secretariat of the Power Sector Recovery Programme (PSRP), stated that 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 are cleaning up our subsidies. We had a setback, we were to remove the fuel subsidy by July this year but there was a lot of pushback from the polity. We have elections coming and also because of the hardship that companies and citizens went through during the COVID-19 pandemic, we just felt that the time was not right, so we pulled back on that.
“But we have been able to quietly implement subsidy removal in the electricity sector and as it is, as we speak, we don’t have subsidies in the electricity sector. We did that overtime by carefully adjusting the prices at some levels, while holding the lower levels down,” Ahmed had said.
Speaking at a media workshop, a member of PSRP Secretariat, Balije Madu, said: “We are aiming that tariff shortfall goes away by end of the year.”
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 recognized that the sector remained at a fundamental level nine years after it was privatized, adding 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, because if tariffs were static and they have inflation and FX issues then distribution companies will have under-recovery of revenue,” he said.
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 further complicated by the situation in the country. A number of the DisCos are impacted by security challenges and all kinds of things impacting on their capacity, either to deliver service or even to recover their 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.
He recalled that one of the policy interventions of the Federal Government is the National Mass Metering Programme (NMMP), saying: “About one million meters were installed at phase zero of the NMMP. Phase one of the NMMP, which envisages the installation of four million meters, will start as soon as the procurement process is concluded. In addition, DisCos have submitted performances.”
Enugu Electricity Distribution PLC (EEDC) revealed in an interview 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%.
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