DisCos Say Without Subsidy, Most Nigerians Can’t Afford Cost of Electricity

The Association of Electricity Distributors of Nigeria (ANED) has said that without electricity subsidy, most Nigerians will not be able to afford the actual cost of power supplied them.

This was even as it said that the Federal Government will continue to pay electricity subsidy until the industry is fully mature and attains a status of charging cost reflective tariff.

The clarification comes as the Nigerian Electricity Regulatory Commission (NERC) last week said the Federal Government paid a total of N135.23 billion to subsidise electricity consumption in the second quarter of 2023.

However the latest industry position was made known by ANED Regulatory Specialist, David Adeyeye, during an interview on a live television interview last week.

Adeyeye had argued that with the current realities in the foreign exchange market, imposing actual cost of electricity on Nigerians would be a near impossibility.

‘‘Today, as we speak the naira exchange rate to a dollar is about N1,150. So, if you allow that, the cost of power becomes unsustainable and that is why a cushion that works must be created in other to allow Nigerians have access to power because we need power to run the economy.

“It is something that the government must have a hand in until we increase the capacity of Nigerians to earn more and be able to power for a cost reflective tariff.

“All over the world, there is a form of subsidy, especially for the power sector because it is a a highly capitalised industry and Nigeria is not doing something that is abnormal,’’ he said.

Adeyeye explained that to keep the industry alive, the Federal Government must continue to provide subsidy to the industry, adding that subsidy, though invisible has always been a part of the power sector.

He said in 2013 the FG, through the Central Bank of Nigeria, provided the stabilsation fund to the Discos to cover the gap between cost reflective and allowed tariff.

Aside the stabilisation fund, he said, the Federal Government equally provided the N701 billion payment assurance guarantee, to cushion market shortfalls.

Adeyeye disclosed that market shortfalls are caused by the allowed tariff as set by the regulator, Nigerian Electricity Regulatory Commission (NERC) is not cost reflective because the Gencos, Discos and Transmission Company of Nigeria (TCN) were selling power to Nigerians at an artificially suppressed price compared to their cost.

‘‘But because this is a decision of the government, it has to fund it for the whole power sector to work and that has been creating a lot of problems and causing inefficiency in the sector.

The government then felt that through NERC, it needs to make the system work through consistent and timely payment of that revenue shortfall gap to NBET In order to allow the Gencos continue to generate power, the government now worked around a module of reducing the debt burden of Discos to the Gencos by paying NBET on a monthly basis, the value of the tariff shortfall. So it is not that Government is giving the monies to the Discos,” he said.