NERC: Reversing Electricity Tariff Hike Could Cost Nigerian Government N3.2 Trillion in Subsidy

The Nigerian Electricity Regulatory Commission (NERC) has revealed that the federal government would have to spend the sum of N3.2 trillion as subsidy on  electricity in 2024 if the recent electricity tariff hike is reversed.

The Chairman of the Commission, Sanusi Garba, disclosed this on Thursday in Abuja  at a stakeholders meeting called by the House of Representatives Committee on Power.

He revealed  that only N185 billion of the N645 billion subsidy in 2023 has been cash-backed, leaving a funding gap of N459. 5 billion.

Garba explained that as a result of the non-payment of subsidy, gas supply, and power generation have continued to dip.

Garba stated: “The unification of FX and current inflationary pressures are pushing cost reflective tariff to N184/kWh.

“If sitting 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.”

Garba pointed that current investments in the sector were not enough to guarantee a steady power supply.

He explained that before the recent review in tariff, Discos were only obligated to pay 10 per cent of their energy invoice, adding that the lack of cash backing for subsidy is creating a liquidity challenge in the sector.

The chairman noted that  if nothing concrete is done to address issues in the sector including foreign exchange fluctuation and non-payment for gas, the sector will be heading for doom.

He stated that the continuous decline in power generation and system collapse are largely linked to liquidity challenges.

The Chairman of the House Committee on Power, Victor Nwokolo  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, saying the committee has not concluded with them because the Transmission Company of Nigeria (TCN)  and the Generation Companies (GENCOs) were not there.

He assured that the committee would hold further consultations with them by next week.

Nwokolo added: “But from what they have said, which is true is that without the change in tariff, which was due in 2022, the industry lacks the capital to bring the needed change.

“Of course, with the population explosion in Nigeria, the areas being covered are beyond what they have estimated in the past and because they need to expand their own network, they also need more money.

“Every day, there are changes to the exchange rate and there are 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.”

Adedayo Akinwale

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