Chairman of the Nigeria Electricity Regulatory Commission (NERC), Sanusi Garba has stated that, reversing the recent increase in electricity tarrif will cost Nigerian government N3.2 trillion as subsidy for the power sector in 2024.
He stated this while speaking at a stakeholders meeting held by the House of Representatives committee on Power on Thursday.
According to him, the current investments in the power sector is not enough to provide and a steady power supply in the country.
He said more concrete steps must be taken to address the various issues like foreign exchange fluctuation and non-payment for gas.
Garba said, DISCOS were only obligated to pay 10 percent of their energy invoice before the increase saying that adding that the lack of cash backing has created a liquidity problem in the sector.
According to him, non-payment of subsidy, gas supply, and power generation have continued to dwindle resulting in the continuous decline of generation and system collapse.
He said, the country must have a sustainable tarrif regime than allowing a total shutdown by the Generation and distribution companies.
The NERC Chairman further explained that between January 2020 and January 2023, the tariff was increased from 55 percent of the cost to 94 percent of cost recovery, adding that unification of FX and current inflationary pressures are also pushing cost reflective tariff to N184/kWh.
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.”
According to him, only N185 billion of the N645 billion subsidy in 2023 has been cash-backed, leaving a funding gap of N459. 5 billion.
On his part, the Vice chairman of NERC, Musiliu Oseni said the tarrif increment was needed to save the sector from total shutdown.
In his remarks, Chairman of the House Committee on Power, Victor Nwokolo said the meeting was convened to address the recent increase in tariff and the issue of band A and others.
He said, “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 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.
“Of course, with the population explosion in Nigeria, the areas being covered are beyond what they have estimated in the past and because they need to expand their own network, they also needed 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 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 tariff. That decision can only be taken by the entire HouseHouse and not at the committee level. There must be a House resolution to stop it.
“That is why we are 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 timeline 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”.
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