LAGOS, Nigeria (VOICE OF NAIJA)–The Federal Government of Nigeria may need to allocate N3.2 trillion in 2024 to roll back the recent electricity tariff hike, said Chairman of the Nigeria Electricity Regulatory Commission (NERC), Sanusi Garba, in Abuja on Thursday.
Addressing stakeholders at a meeting organized by the House of Representatives Committee on Power, Garba emphasized that while current investments in the sector are commendable, they are insufficient to ensure a consistent power supply nationwide.
He further stated that without a comprehensive overhaul of the sector, including addressing fluctuations in foreign exchange rates, Nigeria’s power supply would remain challenging.
He clarified that prior to the recent tariff review, distribution companies were only required to settle 10 percent of their energy invoices, leading to a liquidity challenge in the sector due to insufficient cash backing.
He elaborated that from January 2020 to January 2023, the electricity tariff surged from 55 percent to 94 percent. adding that “the unification of FX and current inflationary pressures are pushing cost reflective tariff to N184/kwh.”
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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 highlighted that out of the N645 billion subsidy allocated in 2023, only N185 billion has been cash-backed, resulting in a funding gap of N459.5 billion.
Vice Chairman of NERC, Musiliu Oseni, echoed Garba’s sentiments, asserting that the recent tariff hike was necessary to prevent the sector from facing complete shutdown.
Chairman of the House Committee on Power, Victor Nwokolo (PDP, Delta), emphasized that the primary objective of the meeting was to discuss the recent tariff hike and the classification of electricity consumers into different bands.
Nwokolo acknowledged that the representatives from NERC and DISCOS provided valuable insights during the session, highlighting the importance of their contributions.“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.
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“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.