World Bank faults Nigeria’s inconsistent electricity tariff policy
• Says country may incur N3trl shortfall by 2023 if...
The World Bank has faulted Nigeria’s inconsistent implementation of its tariff policies saying this has made sustainable electricity operations difficult.
It said based on predictions made earlier in 2020, tariff shortfall may rise above N3trillion by 2023 if such persists.
The bank in a new report titled: Resilience through reform said although, the Nigerian Electricity Regulatory Commission (NERC) periodically issues Multi-Year Tariff Orders (MYTOs) they are not actively enforced,
with frequent delays often due to external factors like litigation.
According to the report,non-enforcement of the Order leads to the financial crisis in sector companies, especially the electricity Distribution Companies (DisCos).
Also, it said there is a lack of clarity on how to reduce losses and meet the capital expenditure targets specified in the Performance Agreements between DisCos and the Bureau of Public Enterprises (BPE), which are used to determine the tariff policy.
It said DisCos are struggling with exceptionally high aggregate technical, commercial, and collection (ATC&C) losses with DisCos reporting on average 50 per cent in 2020, compared to 26 per cent allowed by NERC in the tariff policy.
“These high losses are exacerbated by inadequate metering of end-use customers and the failure of many ministries, departments, and agencies (MDAs) of federal, state and local governments to pay their electricity bills.
“The high losses, coupled with lack of payment discipline by DisCosand inadequate contractual enforcement of those payments by NBET and NERC, results in low remittances to NBET by the DisCos,” it said.
Similarly, the report stated that the lack of cost-reflective tariffs since 2012 and low remittances of DisCos to Nigeria Bulk Electricity Trading Plc (NBET) forced the FG to intervene and cover the shortfall.
However, it said the cost of inaction is very high, warning that if the sector continues its current performance and tariffs stayed not only flat but far below cost-recovery, through 2023 the “FGN would have to provide another N3.082 trillion (US$7.94 billion) in regressive subsidies that benefit mainly the wealthiest consumers.
“And this massive spending would not have brought any improvements in service quality. Apart from taking money away from other important social development efforts, the power sector itself would continue being a serious barrier to economic growth and a threat to fiscal sustainability,” it reads.
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World bank faults Nigeria’s inconsistent electricity tariff policy