Hardship Awaits Electricity Consumers As FG Says Subsidy Not Sustainable

The federal government may have acceded to the recommendation of the International Monetary Fund (IMF) to stop any form of subsidy to any sub-sects of the nation’s electricity value chain.

The sub-sects of the electricity value chain includes generation, transmission, distribution and the end users (consumers).

The Minister of Power, Adebayo Adelabu, gave this indication Wednesday during a press conference, saying that there must be national discourse and agreement on
the nation’s perspective to Electricity supply whether to be seen as  commercial product or social service.

OPTIMUM TIMES recalls that a Senior Advocate of Nigeria and human rights activist, Femi Falana, had urged the Federal government to discard any form of IMF recommendation towards removal of subsidies, noting that similar advice has never been in the interest of the masses.

Falana further cited the prevailing hardship associated with the removal subsidy in petroleum products, instead of curbing the corrupt practices noticeable in the implementation of subsidies.

However, Adelabu painted gloomy picture of the Nigeria Electricity Supply Industry (NESI), citing that there have been persistent liquidity issues coming from inappropriate tariff regime, poor collections and inadequate funding of government subsidies leading to huge debts owed to the transmission, generation and gas supply companies.

According to him, “This has restricted investments required for sustaining supply flow, capacity expansion and infrastructural improvements. It has also not only discouraged lending to the sector by financial institutions as the sectoral activities are not bankable, but has also made the sector unattractive to new investors.

He maintained that there is problem of settlement of existing sectoral outstanding debt obligations to the Gas Supply and Power Generation companies using partly cash payment and guaranteed debt instruments.

Presently, he said N1.3 trillion is current debts to the GenCos and $1.3 billion legacy debts to the GasCos. He further said only 450 billion naira was budgeted for subsidy this year but the ministry needs over 2 trillion naira for subsidy.

He said there is need for “A national discourse on the nation’s perspective to Electricity supply, commercial product or social service. There must be an agreement across divides on how we define electricity.

“Depending on the outcome of the above, either implementation of a cost reflective tariff or a cashed backed Federal government guaranteed subsidy funding regime to inject liquidity into the sector”.