The federal government and the leadership of the National Assembly have reached an agreement on the need to halt the planned hike in electricity tariffs earlier slated to kick off from July 1, 2020.
The agreement was reached after Senate President Ahmed Lawan and Speaker of the House of Representatives, Femi Gbajabiamila held meetings with President Muhammadu Buhari and Vice President Yemi Osinbajo at the Presidential Villa, Abuja.
Already, the leadership of the National Assembly had on Monday succeeded in convincing the Distribution Companies (DisCos) to defer the plan to increase the electricity tariffs till the first quarter of 2021.
The Senate president, while briefing State House reporters after a meeting with the vice president, said the announcement on the increase of electricity tariff in Nigeria was untimely.
Lawan said before the increase, some measures must be put in place including metering of all consumers, adding that the vice president welcomes the idea.
He said: “We have come to visit our vice president, one of our leaders in connection with the impending electricity tariff in the country.
“The joint leadership of the National Assembly sat on Monday with DisCos and Nigeria Electricity Regulatory Commission (NERC).
“We believe that this is not the right time to increase the tariff in the electricity sector.
“Nigerians have a lot of challenges today because of the COVID-19 pandemic and the situation requires that we do everything possible to make life easy for our citizens.
“Of course, the government is doing a lot in this respect but we believe that DisCos should meet with consumers, find better cost effective tariffs.
“But before then, there must be some steps to ensure that the consumers are properly metered, otherwise, you will still go back to guessing what consumers are consuming.
“That is to say that let the billing be scientifically-based, it has to be based on what you actually consumed.
“So, we had this discussion with Mr. Vice President and we are sure that that announcement in the increase of electricity tariff in Nigeria is untimely.
“We believe that we need to do more work to ensure that before any increase, there must be some measures, steps, line of actions that must be exhausted including the metering.
“This is a welcome idea to the Vice President as well.”
Lawan, while reacting to a question that sought to know whether the country could get to a point where there would be a steady power supply so that billing and metering wouldn’t be too hard for Nigerians, said: “I believe that the share purchase agreement signed by the government and the DisCos at the point of the privatisation must be adhered to.
“These are businesses and they must do everything possible to provide services.
“It is when they provide efficient and effective services to consumers that they can make money.
“But as a government, we too must make sure that we discharge our obligations as provided for in the share purchase agreement signed.
“Once we are able to achieve that, we will have a better situation in the power sector in Nigeria.
“It is doable, it has happened elsewhere.
“So, we cannot continue to give DisCos and GenCos the resources that we can ordinarily deploy to build hospitals. But whatever it’s necessary for us to do as part of our agreement with them we must do those.”
On his part, Gbajabiamila said the meetings were necessary so that everybody would be on the same page.
He said everybody agreed with the policy but was not comfortable with the timing of its implementation.
“We have all agreed to suspend this for a while, tarry a while and get the buy-in of the people, explain to the people why this has to be done, that it is for the betterment of the electricity to get stable.
“They are businessmen and cannot be undercutting themselves.
“I think so far so good, the president listened attentively, the vice president listened attentively and I think everybody is on the same page and hopefully, we will get some reprieve between now and whenever.
“But it’s not going to happen today,” he said.
Earlier yesterday, the Senate urged the federal government to grant the request of DisCos on power subsidy.
Recall that at a meeting with the leadership of the National Assembly on Monday, the Discos agreed to defer the planned hike till the first quarter of next year while the lawmakers promised to meet with President Buhari on the issue.
The DisCos, however, said if the planned hike was eventually deferred till next year, the government should continue to bear the difference in the present tariff and what was considered as the appropriate tariff.
The Senate Committee Chairman on Power, Senator Gabriel Suswam, said the executive must agree with the Discos even though it is going to come at a cost.
He said power was being subsidised everywhere in the world especially in developing economies, where people were unable to pay cost-reflective tariffs.
Suswam spoke while briefing newsmen after the Senate plenary.
He said, “Nigerians are heavily burdened because of COVID-19.
“The economy has contracted by 3.2 percent; that is a lot. So it makes it difficult for you and me to attend to some of our social problems.
“So, is the government ready to add to our burden or lessen it?
“The president has been doing well, he has spent so much money, and what we expect is that the spending will gradually reduce or diminish as the power sector becomes more efficient.
“There are two things; one is to make it more efficient and second, the government will back out just like they have done in the oil sector where subsidy has been completely removed.
“Even at that, the government is reducing the pump price.
“So, should they, in the same vein, increase tariff? It doesn’t make sense.
“I think the executive will agree, even though it is going to come at a cost.
“But what cost is more than lessening the burden on the people?” he asked.
FG spent N1.8trn on power in 6 years
The federal government has spent at least N1.8 trillion financing the power sector in the last six years.
While government officials said the funds were subsidies, the operators of the privatised power firms said they were loans given to them to bridge the over N1.5trn liquidity gap created in the power sector after the assets privatisation in 2013.
An analysis of the N1.8tr funding shows that the Central Bank of Nigeria (CBN) gave out N214 billion loan from 2014 through the Nigerian Electricity Market Stabilisation Fund (NEMSF), from which the power Distribution Companies (DisCos) got N58bn.
That loan is being repaid every month presently by the beneficiary firms to the CBN with 11 percent interest rate for 10 years.
Government then initiated the N901.9bn Payment Assurance Guarantee (PAG) I fund for the Nigeria Bulk Electricity Trading Plc (NBET) to have more fund to pay the Generation Companies (GenCos) for the energy they had generated and supplies to the DisCos, but was not completely recovered from bills paid by electricity users.
Upon the exhaustion of that fund, the PAG II of N600bn was initiated in 2019 for similar purpose.
That is ongoing but with the suspension of the electricity tariff hike, there may be need for more funding of the private sector driven power firms by the government.