Federal Government Rules Out Subsidy Funds For The Power Sector

The federal government has ruled out any form of subsidy funding for the power sector. These subsidies, however, are considered by some operators as a way out for the prevailing liquidity crisis.

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Babatunde Fashola (SAN)

Speaking at the monthly Nextier Power Dialogue in Abuja on Wednesday night, The Minister of Power, Works and Housing, Mr. Babatunde Fashola, explained that the government considers the N213 billion Nigeria Electricity Market Stabilisation Fund (NEMSF) provided by the Central Bank of Nigeria (CBN) an adequate subsidy for the sector.

He explained that the fund is a low-interest loan with some moratorium. He also stated that the fund has already been accessed by some operators with the purpose of improving their services.

The NEMSF was created in 2014 by the Central Bank of Nigeria, and records show that by 2016, 24 industry operators had drawn from the fund. These operators include, three Distribution Companies (3 DisCos), fourteen Generation Companies (14 GenCos), National Independent Power Plants (NIPPs), a service provider, and six Gas Companies (GasCos).

Mr, Babatunde Fashola said: “Subsidy appears in different forms. When I resumed in this sector, I was made to understand there is an existing CBN fund for the market. The CBN fund comes at a low interest rate. If that does not qualify as subsidy, then I don’t know what else qualifies.”

In December 2016, spokesman for the Association of Nigerian Electricity Distributors (ANED), Mr. Sunday Oduntan, stated that the shortfall in the power sector was N803 billion, adding that government could help boost liquidity in the sector by providing subsidy, giving moratorium on the CBN facility to operators, and domesticating the price of gas to ramp up declining power generation.

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