Nigeria will need N3.2 trillion to subsidise electricity in 2024 without tariff increase, says NERC
The Chairman of the Nigeria Electricity Regulatory Commission (NERC), Sanusi Garba, said on Thursday, April 18, that the Nigerian government would have to cough out a whopping N3.2 trillion as subsidy for the electricity sector in 2024 if the recent increase in the tariff is to be reversed.
He said this when speaking at a stakeholders meeting called by the House of Representatives committee on Power, Garba said that current investments in the sector were not enough to guarantee a steady power supply.
He said if nothing concrete is done to address issues in the sector including foreign exchange Flutuarion and non-payment for gas, the sector will be heading for doom.
He explained that before the recent review in tariff, DISCOS were only obligated to pay 10 percent of their energy invoice, adding that the lack of cash backing for subsidy is creating a liquidity challenge in the sector.
He said further that as a result of the non-payment of subsidy, gas supply, and power generation have continued to dip, adding that the continuous decline of generation and system collapse are largely linked to liquidity challenges.
He raised an alarm of what he called a looking risk not a total shutdown by the Generation and distribution companies, achieving cost-effective tariffs is key to the sustainability of the sector.
He further explained that between January 2020 and January 2023, the tariff increased from 55 percent of the cost to 94 percent of cost recovery, adding that “the unification of FX and current inflationary pressures are 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.”
Garba also said that only N185 billion of the N645 billion subsidy in 2023 has been cash-backed, leaving a funding gap of N459. 5 billion.
Vice chairman of NERC, Musiliu Oseni who also justified the recent increase in tarrif said the increment was needed to save the sector from total shutdown.
