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How CBN’s interventions can address N1trillion electricity subsidy – Experts

December 12, 2021

Experts have said current interventions by the Central Bank of Nigeria (CBN) remain a major avenue to ease burden on consumers as the Federal Government plan to remove subsidy, projected at N1 trillion in the electricity sector.

The Federal Government recently said Allowable Tariff (AT) in the country creates a gap of N28 per unit as against what’s currently paid under the Service Based Tariff.

The gap in the electricity supplied to consumers therefore, stands at about N1.0 trillion between 2019 and 2021.

Special Adviser to President Muhammadu Buhari on Infrastructure, Ahmad Zakari had disclosed at the 12th edition of PwC Nigeria’s Annual Power and Utilities Roundtable that the nation needs to optimise the potentials in the power sector through a cost-reflective tariff regime.

The CBN had introduced a number of interventions in the sector to keep it afloat from liquidity crisis.

Power and Aviation Intervention Fund (PAIF), hovering at about N300 billion, Nigerian Electricity Market Stabilisation Facility (NEMSF) at about N213 billion, N140 billion Solar Connection Intervention Facility, over N600 billion tariff shortfall intervention as well as a recent N120 billion intervention designed for mass metering among others are part of the interventions.

The CBN alongside the Federal Government had to initiate interventions to douse tension and avert a collapse of the 2013 electricity privatisation exercise.

In about eight years, CBN would have spent over N1.5 trillion to keep the nation’s power sector afloat although the sector was privatised with the intention of surviving by itself.

Although most stakeholders insisted that the interventions remained critical, especially in ease the liquidity crisis and attracting further interventions, they maintained that tweaking the interventions in manners that would ease further burden on the masses and also halt arbitrary billing of consumers.

Segun Ajibola, the former President and Chairman of Council of Chartered Institute of Bankers of Nigeria (CIBN), said the strongest argument in favour of subsidy is the need for government to protect the welfare of the people by underwriting some of their basic household and infrastructure needs.

Read also: Nigeria’s power sector needs infrastructure investment model to unlock liquidity

Ajibola noted however, that the argument about removal of electricity subsidy, if any, is not the most fundamental to Nigeria at the moment.

“Rather, the inability to supply the electricity needs of Nigerians, in the right quality and quantities. If supply deficit could be remedied, the cost of electricity and energy generally would be cheaper to Nigerian households firms and even government compared with the cost of alternative sources of power to them,” he noted.

According to him, the CBN initiatives may help the sector resolve the liquidity requirements to some extent but the end must be allowed to justify the means of assurance of supply of electricity requirements in exchange for such support by the CBN.

Wunmi Iledare, an expert, noted that interventions by the CBN as a payable loan is understandable even if it is a forgivable loan.

He insisted that the current structure of the electricity market in the country could mar the interventions, stressing that there must be decentralised energy planning system.

According to him, while it is good that banks are targeting spending, subsidy may be a political expediency instrument not economic efficiency.

“It should be disavowed. By the way estimated billing now termed electronic billing is fraudulent!

A quick way to bring subsidy to an end is metering and decentralisation of power management and services nearly everything centralised in the fashion of militarism has failed woefully, education, health, energy services, road infrastructure, name it,” Iledare said.

An energy expert, Eseosa Lloyd Onaghinon, said that the energy sector must be rid of inefficiencies, which is usually passed on to consumers, adding that there is about 40 percent inefficient loses between transmission and distribution.

“If we do not address such losses that occur, we might as well get into a trap where it’s an unending discussion of ‘subsidy’ though it is actually continuous inefficiencies covered up as subsidies,” Onaghinon stated.

An energy lawyer, Osagie Agbonlahor, stated that doubted the possibility of electricity, adding that the development could be part of the failure electricity operators and revenue collectors by the powers that be.

“How many Army, Police, Air Force, Navy barracks that the residents pay electricity rates at all? How many government ministries, Army, Air Force, Navy offices pay for electricity consumption? Who has ever had the courage to drive to the barracks to remove wires as they would to ordinary Nigerians?

“For how long have this been going on in this country? Take away this huge leakage and you will see that the ordinary Nigerians have actually been sustaining and subsidising the consumption of these fat cows,” Agbonlahor said.

He said the government broached the idea of deducting the huge outstanding bill on electricity consumed by the Barracks and government offices was during the time of the former President Obasanjo administration.

Observing that the development has remained elusive since then, he noted that “until we start to do the right things, we are just going to be beating about the bush.”

He asked government to do a forensic audit of N1 trillion subsidy to check where the so-called subsidy is coming from.

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