The Federal Government of Nigeria plans to spend $3 billion on the energy sector in the next 24 months and end the current electricity subsidies by December 2021.
The spending is expected to increase the power being wheeled by the Transmission Company of Nigeria (TCN) from the current 4,900MW to at least 7,000MW.
Speaking during a webinar hosted by the Abuja Chamber of Commerce and Industry (ACCI), Special Adviser to President Muhammadu Buhari on Infrastructure, Ahmad Zakari, said that following the $500 million loans the government secured from the World Bank earlier this year, it is expecting another facility from the African Development Bank (AfDB), saying that the gestures are a demonstration of confidence in the reforms being currently made in the sector.
Ending subsidies on electricity by the end of 2021
The collection efficiency of the Distribution Companies (Discos), has significantly improved since the CBN started warehousing the funds. Zakari explained: “With this enhanced metering on the service-based tariff, we can see the Nigerian electricity supply industry generating over N100 billion in the near to mid-term. This is very impressive.”
“The hypothesis that we have is that if you enhance payment discipline through metering the population, revenue will go up. We have proven that,” he stated.
Zakari said that the current administration was focused on moving from the traditional way of funding subsidies or using the liquidity in the sector to fund consumption. Rather, he said, the subsidy budget would go into infrastructure that would ultimately lead to growth.
“People say if you eliminate subsidies you are going to have poor people or the vulnerable people pay more. But we argue that the only reason the power price in Nigeria is high is that we do not generate enough.
“If you generate 10 gigawatts of power, the tariff will be half of what it is now. Keeping the prices officially low is not the approach; increasing delivery power is the approach that will effectively get the same output, which is, making the citizen pay lower,” said Zakari.
General Manager, Finance and Management Services of the Nigerian Electricity Regulatory Commission (NERC), Abdulkadir Shettima, said the major problem within the system was non-adherence to contractual terms.
Shettima argued that when legal agreements are broken, there should be sanctions, maintaining that many stakeholders were nonchalant to obeying regulatory directives.