Nigeria’s Annual Power Subsidy of N200 Billion to End December 2022

Nigeria’s Annual Power Subsidy of N200 Billion to End December 2022

By December this year, the Nigerian government intends to address the energy pricing gap, which now stands at N200 billion per year by ending it.

The shortfall was anticipated to reach N2.4 trillion between 2015 and 2020, with an annual average of N200 billion. Reduced power usage costs were to blame for the gap.

As a result, starting in December of this year, Nigerians may be obliged to pay the full cost of power consumed.

Emerging issues, particularly insecurity, are already straining the industry, according to the Nigerian Electricity Regulatory Commission (NERC).

According to the Secretariat of the Power Sector Recovery Programme (PSRP), 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 discreetly abolished all subsidies in the electricity sector, with a plan to phase down subsidies on gasoline over time.

“We’re de-subsidizing our subsidies.” We suffered a setback; we were supposed to abolish the gasoline subsidy by July of this year, but the polity objected strongly. We had elections coming up, and we also believed that the moment was not ideal because of the difficulty that businesses and residents had during the COVID-19 outbreak, so we backed off.

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“However, we have been able to discreetly remove subsidies in the electrical industry, and we currently do not have subsidies in the electricity sector.” “We achieved this over time by carefully changing pricing at some levels while keeping lower ones cheap,” Ahmed explained.

“We are looking for the tariff gap to go gone by the end of the year,” said Balije Madu, a member of the PSRP Secretariat, speaking during a media workshop.

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 recognised that the industry remained at a fundamental level nine years after it was privatised, and 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.

Chairman of NERC, Sanusi Garba, said the inability to fix adequate tariffs led to challenges facing the distribution companies. He added that the development affected the financial viability of the distribution companies.

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“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 admitted that the situation must have affected the companies in raising necessary capital and operating expenses.

Garba stated that a lot has to be done to help the DisCos out of the present 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 problems are made more difficult by the country’s position. “A lot of the DisCos are being hampered by security issues and a variety of other factors that are affecting their capacity to supply service or even recoup money,” Garba added.

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.

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“About one million metres were put during phase zero of the NMMP,” he said, recalling one of the Federal Government’s policy initiatives, the National Mass Metering Programme (NMMP). As soon as the procurement procedure is completed, phase one of the NMMP, which calls for the installation of four million metres, will begin. Performances have also been submitted by DisCos.”

Enugu Electricity Distribution PLC (EEDC) informed The Guardian that insecurity in its franchise area has had a negative impact on not just revenue and collection, but also overall performance, with revenue down by roughly 40%.


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