FG needs N3.2tn subsidy to reverse electricity tariff hike – NERC
19th April 2024
Electricity Tariff Hike
By
Dirisu Yakubu
The Federal Government of Nigeria will need to come up with the sum of N3.2trn in 2024 to reverse the recent hike in electricity tariff, the Chairman of the Nigeria Electricity Regulatory Commission, Sanusi Garba said in Abuja on Thursday.
Speaking at a stakeholders meeting convened by the House of Representatives Committee on Power, Garba said that current investment in the sector, though commendable, was not good enough to guarantee a steady power supply across the country.
He added that if a total sectoral overhauling was not carried out, including fluctuation in foreign exchange, power supply in Nigeria would continue to pose a challenge.
He explained that before the recent review in tariff, distribution companies were only obligated to pay 10 per cent of their energy invoice, adding that the lack of cash backing was creating a liquidity challenge in the sector.
He further explained that between January 2020 and January 2023, the electricity tariff increased from 55 per cent to 94 per cent adding that “the unification of FX and current inflationary pressures are pushing cost reflective tariff to N184/kwh.”
He said, “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 N185bn of the N645bn subsidy in 2023 has been cash-backed, leaving a funding gap of N459. 5bn.
Vice Chairman of NERC, Musiliu Oseni, who also justified the recent increase in tariff said the increment was needed to save the sector from total shutdown.
Chairman of the House Committee on Power, Victor Nwokolo (PDP, Delta) said the essence of the meeting was to address the recent increase in tariff and the various bands to which electricity consumers were recently categorised.
The lawmaker said the officials of NERC and DISCOS had given the committee useful Information, noting that “We have not concluded with them because the transmission company of Nigeria was not here and the generation companies too.
“We will hold further consultations with them by next week. But 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 estimated in the past and because they need to expand their 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; 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,” he said.
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