To subsidise electricity, FG will require N3.2trn – NERC

Sanusi Garba, the chairman of the Nigeria energy Regulatory Commission (NERC), stated on Thursday that if the recent tariff hike is to be reversed, the federal government will need to provide N3.2 trillion in subsidies for the energy industry in 2024.

Garba stated that current investments in the industry were insufficient to provide a consistent supply of power while speaking at a stakeholders’ meeting that the House of Representatives committee on Power had organised.

He asserts that the industry will face certain demise if nothing significant is done to address problems such as fluctuating foreign exchange rates and unpaid petrol bills.

He clarified that before the most recent review in Tarrif, DISCOS were only required to pay 10% of their energy invoice. He also mentioned that the industry is facing a financial crisis due to the absence of funding for aubaidy.

He went on to say that the lack of payment of subsidies has caused the gas supply and electricity generation to continue declining, and that the system failure and ongoing generation reduction are substantially related to the liquidity issue.

Achieving a cost-effective tariff is essential to the sustainability of the industry, and he expressed concern about what he called a looking risk—that the generation and distribution companies might not completely shut down.

He further explained that between January 2020 abe January 2923, tarrif increased from 55 percent of cost to 94 percent lt cost recovery, adding that “the unification of FX and current inflatinarybpressurws are pushing cost reflective tarrif to N184/kwh.

He said “if seating 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.

Vice Chairman of NERC, Musiliu Oseni who also justified the recent increase in tarrif 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 tarrif abd the issue of band A and others.

Nwokolo said the officials of NERC and DISCOS have given the committee useful Information, adding “we have not concluded with them because the Transmission Company of Nigeria were not here and the Generation Companies too.

“We will hold further consultations with them by next week. But from what they have saidsaid which is true is that without the change in tarrif, which was due since 2022, the industry lack the capital to bring the needed change.

“Of course, with the population explosion in Nigeria, the areas being covered is beyond what they have estimated in the pastpast and because they need to expand their own network, they also needed more money.

“Every day, there are changes to th exchange rate and there is 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 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 tarrif. That decision can only be taken by the entire HouseHouse and not at committee level. There must be a House resolution to stop it.

“That is why we happy that the House is not seating next week as that will afford us an opportunity for wider consultation so that we know what yo present to the entire House. We are interested in the time line for improvement in service delivery because what Nigerians want is service delivery because light will take care of our security challenges and many other things”