FG Will Pay N3.2tr For Electricity Tariff To Be Reverted- NERC

The Federal Government might need to allocate a substantial N3.2 trillion subsidy for the electricity sector in 2024 if the recent tariff increase is to be reverted.

Chairman of the Nigeria Electricity Regulatory Commission, NERC Sanusi Garba disclosed this in Abuja at a stakeholders meeting convened by the House of Representatives committee on Power.

Garba who said that current investments in the sector were not enough to guarantee a steady power supply explained that if nothing concrete is done to address issues in the sector including foreign exchange fluctuations and non-payment for gas, the sector faces imminent crisis.

He told the committee that before the recent review in tariff, DISCOS were only obligated to pay 10 percent of their energy invoice, and that lack of cash backing for subsidy is creating a liquidity challenge in the sector.

The NERC Boss who pointed out that as a result of the non-payment of subsidy, gas supply, and power generation have continued to drop, and the continuous decline of generation and system collapse are largely linked to liquidity challenges.

He further explained that between January 2020 and January 2023, the tariff increased from 55 percent of the cost to 94 percent of cost recovery, adding that “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 also said that only N185 billion of the N645 billion subsidy in 2023 has been cash-backed, leaving a funding gap of N459. 5 billion.

On his part, 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.

Mr. Nwokolo said tmofficials of NERC and DISCOS have given the committee useful Information, adding that there was the need for wider consultations before any decision on tariff adjustments can be made.

He also stressed the imperative for improved service delivery amid Nigeria’s growing population and security concerns.

“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 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 needed more money.

“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 the committee level. There must be a House resolution to stop it.

Oduyemi Odumade,Edited By Grace Namiji