‘Electricity tariff shortfall may rise over N3trn by 2023’

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4 years ago

Nigeria’s tariff shortfall may rise over N3trillion by 2023 with the current tariff policy which has not allowed for cost-reflective in Nigeria’s Electricity Supply Industry (NESI), the World Bank on Wednesday states.

In its prediction, the Power Sector Recovery Programme (PSRP) driven by the WB said if the policy persists, the government may require N3.4trillion to fund the tariff gap.

By implication, the cumulative tariff shortfall will be five times the 2020 budget allocation for Education and seven times the allocation for Health.

The Senior energy specialist WB, Muhammad Abba Wakil, stated this in his presentation on a factsheet on tariff shortfall at a virtual media workshop.

According to the factsheet, the FG’s intention at keeping tariff low was to help the economically disadvantaged but this move is mostly beneficial to the rich.

“The Government for years was paying the difference because the Government wanted to help poor Nigerian families to pay their bills. But richer families use more electricity, so a big chunk of Government support ends up going to those who do not really need help with paying bills,” it says.

The factsheet states that only 22 per cent of the poorest households are connected to the grid, stressing that:”For every N10 the government spends on meeting the tariff shortfall, N8 goes to the richer households who don’t need help paying their bills.”

Wakil in his presentations on the PSRP noted that if sector performance and discipline is not improved, Government may need to provide the required sum to support the sector by 2023.

Meanwhile, the Senior energy specialist said because of the erratic power supply, businesses in Nigeria lose about $29billion annually.

“An average Nigerian consumes 4 times less energy than her counterpart in a typical lower middle-income country. Businesses in Nigeria lose about US$29 billion annually because of unreliable electricity.

In view of this, he said the PSRP is a comprehensive response to Nigeria’s power challenges.

“Its aim is to renew Nigeria’s economy by rebuilding a functioning and fair power sector. Given the enormity and complexity of issues, the Government decided to first focus PSRP on the distribution segment since it is the most pressing sector constraint,” he said.

He further disclosed that between June 2020 and February 2021, the World Bank Board had approved $1.25 billion financings to support the Government in its efforts to reset the power sector. World Bank’s Power Sector Recovery Operation and Distribution Sector Recovery Programme designed to support PSRP implementation.

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