The Federal Government has declared that the deficit in amount of electricity tariff payable by consumers has hit N42obn. This amount was obtained between January 2015 and December 2016. This comes after a backdrop of calls by the distribution companies (DisCos) and other experts to introduce the cost reflective tariff which is tantamount to increase in electricity tariff. The stand of these proponents is that the present tariff has discouraged private sector investment in the power sector which is very evident in the N420bn shortfall.
According to the government, the huge tariff shortfall has been a major constraint to the power sector due to insufficient end user tariffs that should have been paid to the industry. The government stated that the power sector had been faced with series of constraints and challenges despite the many reforms in the industry. It noted that with the reforms in the sector still unable to achieve a regime of fully effective contracts, many challenges had created the need for a market reset.
It said, “The challenges include infrastructure constraints associated with gas, generation, transmission and distribution; insufficient end user tariffs; sector tariff shortfalls between January 2015 and December 2016 of N420bn; slow pace of loss reduction and load rejection by the Discos (distribution companies); and sector governance challenges. Collectively, these challenges have discouraged private sector investment in the sector and continued to impede Nigeria’s economic development.”
The government stated that its attempt to implement sustainable programmes for the improvement of the power sector dates back to the National Electric Power Policy in 2001, and even years after privatisation, the sector still faced infrastructure, liquidity and governance challenges that required specific strategic interventions by the government.
It said, “For this reason, the Federal Government initiated the May 2016 Road map of incremental, steady and uninterrupted power supply. The 2016 road map with its related deliverables like improvements in sector governance, meter supply, eligible customers and mini-grid regulation, dovetail into a comprehensive electricity market intervention by government – the Power Sector Recovery Programme. The PSRP was designed on this basis and aims to reset the Nigerian Electricity Supply Industry, while enhancing the 2016 road map.”
It further stated that the aim of the programme was to restore the financial viability of Nigeria’s power sector, improve transparency and service delivery, resolve consumer complaints, reduce losses and energy theft and reset NESI for future growth. The Federal Government developed the PSRP in collaboration with the World Bank Group and the programme is comprised of components/reform actions in four groups of interventions, which include financial, operational/technical, governance and policy interventions.