How to halt N1t electricity subsidy, CBN’s N1.5t interventions
- Dec 6, 2021 5:34 pm GMT
Electricity stakeholders in the country, yesterday, insisted that removal of subsidy in the power sector was feasible if the Federal Government and the
Last week, the Federal Government alerted that the gap between the Cost Reflective Tariff (CRT), and Allowable Tariff (AT) peaking at N28 per unit of electricity supplied to consumers, this year stands at about N1t.
Coming at a time that it is also considering subsidy removal on Premium Motor Spirit (PMS), the Special Adviser to President
Since the sector was privatised in 2013, perpetual interventions through the CBN have served as lifelines to the sector. They include Power and
Fueled by tariff shortfall, receivable collection, technical, commercial and collection losses, financial liquidity in the power sector hovers around N4t as the apex bank, alongside the Federal Government has continued to initiate a series of interventions to douse tension and avert a collapse of the 2013 electricity privatisation exercise.
In about eight years, the CBN would have spent over N1.5t to keep the nation’s power sector afloat although the sector was privatised to survive by itself.
Although most stakeholders insisted that the interventions remained critical, especially in easing the liquidity crisis and attracting further interventions, they maintained that tweaking the interventions in manners that would ease further the masses’ burden and halt arbitrary billing of consumers was very important.
Renowned energy expert, Prof. Wunmi Iledare, noted that interventions by the CBN as a payable loan was understandable, even if it is a forgivable loan.
He insisted that the current structure of the electricity market in the country could mar the interventions, stressing that there must be a decentralised energy planning system.
According to him, while it is good that banks are targeting spending, subsidy may be a political expediency instrument, not economic efficiency hence “it should be disavowed. By the way, estimated billing now termed electronic billing is fraudulent! A quick way to bring subsidy to an end is metering and decentralisation of power management and services. Nearly everything centralised in the fashion of militarism has failed woefully, education, health, energy services road infrastructure, name it,” Iledare said.
An energy expert, Eseosa Lloyd Onaghinon, stated that the energy sector must be rid of inefficiencies, which is usually passed on to consumers, adding that there are about 40 per cent inefficient losses between transmission and distribution.
“If we do not address such losses that occur, we might as well get into a trap where it’s an unending discussion of ‘subsidy’ even though it is continuous inefficiencies covered up as subsidies,” Onaghinon stated.
For energy lawyer,
“How many army, police, air force, navy barracks in the country that their residents pay electricity bills at all? How many government ministries, army, air force, navy offices pay for the electricity that they consume? Who has ever dared to drive to the barracks and disconnect their source of public power supply the way they do to ordinary Nigerians? For how long has this been going on in this country? If you take away these huge leakages, you will see that the ordinary Nigerians have been sustaining and subsidising the electricity consumption of these people.
Agbonlahor said that the government broached the idea of deducting the huge outstanding electricity bill consumed in barracks and government offices under President
He noted that “until we start to do the right things, we are just going to be beating about the bush.”
He asked the government to do a forensic audit of the N1t subsidy to check where the so-called subsidy is coming from.
The Guardian had earlier reported that the failure of federal and state governments, as well as their ministries and agencies to pay over N100b outstanding electricity bills is currently worsening the liquidity crisis in the sector.
The situation has also reportedly led to distribution companies hounding private electricity consumers who pay more through estimated bills and higher tariffs, rather than recover outstanding debts from government agencies.
In this article
No discussions yet. Start a discussion below.
Get Published - Build a Following
The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.
If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.