New electricity tariffs and removal of subsidies

Minister of Power, Engr. Saleh Mamman
Minister of Power, Engr. Saleh Mamman.

Minister of Power, Alhaji Saleh Mamman, restated the federal government’s commitment to institute a new electricity tariff regime on April 1, 2020, and also stop subsidising the power sector because electricity Distribution Companies (DisCos) have failed to make optimum use of the financial interventions.

 Mamman said he has already submitted a memo to the Federal Executive Council on the fate of the DisCos that have failed to honour their commitments to buy and distribute adequate power generated for them by the Generation Companies (GenCos).

 Currently, the DisCos do not evacuate all of the about 13,000 megawatts generated by the GenCos, and while 7,000 megawatts out of this is transmitted, the DisCos eventually pay for only 15 per cent of the 3,000 megawatts they are able to distribute.

 The implication is technical economic losses as the GenCos don’t get value for the electricity they generate, and the end consumers also do not get adequate electricity despite the output of the GenCos.

 The minister stated that the DisCos may have to quit and give way to more capable operators if they are not able to fulfil their obligations as agreed with government.

 Noting the several financial interventions it has made, the minister said, “Government cannot continue to subsidise because what they are doing is that they collect 3,000 megawatts and pay for only 1,000 megawatts. That is 15 per cent of what they are collecting. So, the government is the one completing the payment. We cannot continue like that.

“We have come up with a plan – the issue of willing buyer, willing seller. You know there is generated electricity that we cannot pick at all. So, we are now asking the GenCos: ‘You can imagine we are only paying them 15 per cent out of 100. So, where do we take the remaining 85 per cent to? Even if NBET (Nigeria Bulk Electricity Trading Plc) is collecting 100 per cent, gas alone is taking 60 per cent; only 15 per cent is used for their overheads. NBET buys electricity from DisCos, supplies to GenCos and collects money from DisCos and pay the GenCos. That is why we have the gaps and that is why we have to do something to correct these gaps.”

 By the minister’s statement, it is clear that he has not made up his mind on what needs to be done for Nigerians to start enjoying uninterrupted supply of electricity. His explanation is wishy-washy as big and drastic decisions must be made if, by April 1, 2020, the government must stop paying subsidies to sustain even the epileptic supply. With the minister’s posture, it means that Nigeria is prone to being thrown into darkness.

What Nigeria needs in the energy sector is bold and quick decision. This is not just another talk shop issue. In any case, the government must decide on what to do with the licences of the DisCos as it seems they were sold to political merchants.

But what the government is not admitting all along is that the country has been operating a subsidy model where consumers in the cities pay higher tariffs while those in the rural areas pay low. So, automatically, removing subsidies now would be arbitrary as it totally amounts to punishing Nigerians for the inefficiency of the electricity supply system and the incompetence of the GenCos and DisCos operators.

And this inefficiency and incompetence in the power sector is one thing that has prevented Nigeria from growing its economy; that is holding down the creative energy of Nigerians.

So, the federal government should get its acts together and take bold and painful decisions on how to give Nigerians reliable, uninterrupted and efficient electricity supply. This is the time to correct the mistakes of the past and not to indulge or bemoan the past in which these public power utilities were sold to friends and associates of those in government.

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