December 2, 2021

FG puts electricity subsidy cost at N1tn

Full List: NERC unveils areas electricity tariff hike will affect in Lagos

Outlines strategy in power sector revamp

By Ediri Ejoh

The Federal Government has hinted that its subsidy on electricity tariff is about N1.0 trillion between 2019 and 2021.

The amount represents the gap between the  Cost Reflective Tariff  (CRT) and Allowable Tariff (AT) which peaked at N28 per unit of electricity supplied to consumers.

This, according to the government, was largely responsible for liquidity crunch in the power sector as well as the poor power supply in the country.

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Consequently, it has disclosed its plans to re-align its policies, regulations and the activities of the power sector operators as a means of improving electricity supply.

Disclosing these at the 12th edition of PwC Nigeria’s Annual Power and Utilities Roundtable, yesterday, Ahmad Zakari, Special Adviser to President Muhammadu Buhari on Infrastructure, also said that the nation needs to optimise the potentials in the power sector through a cost-reflective tariff regime.

He stated: “We need a holistic review, the first thing is regulatory and policy alignment. Through this measure by the government, we can eliminate the gap in service based tariff.

“At this time, DISCOs with the revised economic models, will be faced with incentives and penalties that would allow them to be able to achieve optimisation. The second phase will now be infrastructure alignment. If the economics of tariff-base works, then infrastructure will be improved.

  “With cost-reflective tariff everything will fall in place in the power sector. From the Government’s perspective as we migrated towards this, we have understanding that more needs to be done. For instance, our cost reflective tariff (CRT) versus allowable tariff (AT) gap reached a peak of N28 gap in 2019, at that rate, between that period and 2021 alone, we would have recorded N1 trillion in tariff shortfall or subsidy.”

He noted that, “As at 2015, at the take-off of the power sector privatization, the gap between CRT and AT was about N15. That figure has reduced to N6.

“The gap has closed from N28, N15 and now N6. Essentially, after the last MYTO, cost reflective tariff became N55 and defective tariff that the DISCOs are allowed to charge was N49.

“By January next year, after the review of the MYTO that tariff gap will be eliminated completely. That elimination of the tariff gap will ensure that we optimise and get all of our installed 12Giggawatt of electricity generation capacity delivered.”