President Muhammadu Buhari says borrowing to subsidize electricity generation and distribution is “grossly irresponsible” considering both sectors are privatized.
Recall that the Nigerian Electricity Regulatory Commission (NERC) had approved an increase in electricity tariffs with effect from September 1, 2020, a move which was met with outrage by Nigerians.
Electricity customers, except those receiving less than 12 hours of supply and those without meters, now pay more for electricity.
Speaking at the First Year Ministerial Performance Review Retreat, in Abuja, on Monday, Buhari said NERC approved that adjustments had to be made but only on the basis of guaranteed improvement in distribution service.
He lamented the poor quality of service by DisCos, noting that poor transmission capacity and distribution capacity are also major constraints.
The president revealed that, so far, government has spent N1.7 trillion to supplement tariff shortfalls, adding that there’s no more resources to continue in this way.
Buhari further disclosed that the country’s electricity regulator had also committed to enforcing the capping regulation which will stamp out estimated billings.
“The recent service-based tariff adjustment by the Discos has also been a source of concern for many of us,” he said.
“Let me say frankly that like many Nigerians I have been very unhappy about the quality of service given by the Discos, but there are many constraints including poor transmission capacity and distribution capacity.
“I have already signed off on the first phase of the Siemens project to address many of these issues. Because of the problems with the privatization exercise, government has had to keep supporting the largely privatized electricity industry. So far to keep the industry going we have spent almost 1.7 trillion, especially by way of supplementing tariffs shortfalls. We do not have the resources at this point to continue in this way and it will be grossly irresponsible to borrow to subsidize a generation and distribution which are both privatized.
“But we also have a duty to ensure that the large majority of those who cannot afford to pay cost reflective tariffs are protected from increases. NERC, the industry regulator therefore approved that tariff adjustments had to be made but only on the basis of guaranteed improvement in service.
“Under this new arrangement, only customers who are guaranteed a minimum of 12hours of power and above can have their tariffs adjusted. Those who get less than 12 hours supply, or the B and D and E Customers MUST be maintained on lifeline tariffs, meaning that they will experience no increase. This is the largest group of customers.
“Government has also taken notice of the complaints about arbitrary estimated billing. Accordingly, a mass metering program is being undertaken to provide meters for over 5 million Nigerians, largely driven by preferred procurement from local manufacturers – creating thousands of jobs in the process.
“NERC has also committed to strictly enforcing the capping regulation which will ensure that unmetered customers are not charged beyond the metered customers in their neighbourhood. In other words, no more estimated billings.”
The president explained that the recent increase in electricity tariffs and premium motor spirit (PMS) prices were only coincidental and not meant to inflict more hardship on Nigerians.
“There has been some concern expressed about the timing of these two necessary adjustments,” Buhari said.
“It is important to stress that this is coincidental in the sense that the deregulation of PMS prices happened quite some time ago, it was announced on 18 March 2020 and the price moderation that took place at the beginning of this month was just part of the on-going monthly adjustments to global crude oil prices.
“Similarly, the review of service-based electricity tariffs was scheduled to start at the beginning of July but was put on hold to enable further studies and proper arrangements to be made.
“This government is not insensitive to the current economic difficulties our people are going through and the very tough economic situation we face as a nation, and we certainly will not inflict hardship on our people.”