The staggering 700 billion naira spent in 2023 to subsidise electricity has prompted stakeholders to advocate the exploration of alternative uses of the resources currently allocated to electricity tariff subsidies.
The Minister of Power had recently, during his working tour of power facilities in Nigeria to the Ibadan Electricity Distribution Company (IBEDC), said the federal government had spent N700 billion to subsidise electricity last year.
He said the government continues to subsidise electricity as current charges are not cost-reflective.
However, stakeholders have emphasised that sustaining electricity subsidies is not viable. They rather called for subsidising generation as it ensures the full realisation of economic costs associated with making electricity accessible to consumers.
Speaking with The Guardian, Executive Director of PowerUp Nigeria, Adetayo Adegbemle, said despite the N2 trillion subsidies paid since 2015, there has been minimal private sector investment in the sector.
He urged the federal government to take a quick decision before the situation spirals out of control like the petrol subsidy.
“Another issue facing the electricity market is the delay and bottlenecks associated with paying the electricity subsidies as well as the slow cycle of the electricity market. The subsidies are funded from various pools such as the budget appropriation, FG commitments domiciled at the Federal Ministry of Finance, World Bank guarantees and loans as well as CBN facilities,” he said.
Adegbemle stressed that the figures released by the Nigerian Electricity Regulatory Commission (NERC) Q3 report show clearly that the electricity tariff subsidies have disproportionately benefited the rich Nigerian consumers while excluding the poor ones.
The National Bureau of Statistics (NBS) data reveals that households with higher income exhibit a greater electricity consumption pattern compared to their economically-disadvantaged neighbours.
Corroborating Adegbemle’s view, an electricity analyst, Lanre Elatuyi, told The Guardian that the sustainability of subsidy payment by a government that is broke is a challenge.
He further stated that the multi-year tariff order (MYTO) used for tariff setting permits both major and minor reviews to adapt to changes in the assumptions underlying tariff modeling.
In the absence of a cost-reflective tariff, the government is obligated to bridge the gap between the allowed tariff and the cost-reflective tariff, he said.
“FX unification and high inflationary pressure have impacted on the tariff and if the government, for socio-political reasons, prevails on the regulator not to allow upward review of tariffs, the government will bear the burden of subsidy. This is our reality today,” he said.
Meanwhile, the Minister said that President Tinubu has initiated a presidential metering programme to harmonise all metering acquisitions in the country.
He said Nigeria still has up to eight million metering gaps, which the initiative aims to close in three to five years.
