The federal government says it will require about N3.2 trillion to subsidise electricity in 2024, if the current tarrif increase has to be reversed.
Sanusi Garba, the chairman, Nigeria Electricity Regulatory Commission (NERC), said this at a stakeholders’ meeting organised by the House of Representatives committee on power in Abuja on Thursday.
He said that the investments in the sector were not enough to guarantee a steady power supply nationwide.
He added that if nothing was done to address foreign exchange fluctuation and non-payment for gas, the sector would collapse.
He said that prior to the tariff review, Electricity Distribution Companies (DisCos) were only obligated to pay 10 per cent of their energy invoices, adding that lack of cash backing for subsidy had created liquidity challenges for the sector.
He added that as a result of the non-payment of subsidy, gas supply and power generation had continued to dip.
He said that the continued decline in the generation and system collapse were largely linked to liquidity challenges.
He said from January 2020 to 2023, the tariff was increased from 55 per cent to 94 per cent of cost recovery.
He added that “the unification of FX and current inflationary pressures were pushing cost reflective tariff to N184/kWh”
“If sitting back and doing nothing is the way to go, it will mean that the National Assembly and the Executive would have to provide about N3.2 trillion to pay for subsidy in 2024,” he said.
Mr Garba said that only N185 billion out of the N645 billion subsidy in 2023 was cash-backed, leaving a funding gap of N459.5 billion.
The vice-chairman of NERC, Musiliu Oseni, also justified the recent tariff increase, saying the increment was needed to save the sector from total collapse.
Rep. Victor Nwokolo, the chairman of the committee, said the essence of the meeting was to address the increase in tariff and the issue of band A and others.
Mr Nwokolo said the officials of NERC and DISCOS had provided useful Information to the committee.
“We have not concluded with them because the Transmission Company of Nigeria is not here and the Generation Companies too.
“From what they have said which is true, is that without the change in tarrif, which was due since 2022, the industry lacks the capital to bring the needed change.
“Of course, the population explosion in Nigeria, is beyond what they have estimated in the past and because they need to expand their own network, they also needed more money, ” he said.
(NAN)
