Home / ASSETS & FINANCIALS / FG spends N568.5bn annually on power tariff shortfalls – World Bank

FG spends N568.5bn annually on power tariff shortfalls – World Bank

FG spends N568.5bn annually on power tariff shortfalls – World Bank• FG questions bank data accuracy

The Federal Government of Nigeria is spending $1.5bn (N568.5bn at N379/$ exchange rate) annually to fund electricity tariff shortfalls, the World Bank has said.

According to the global financial institution, this amount could further increase if the country fails to take the right action.

The bank disclosed this in its enlarged report on Nigeria Power Sector Recovery Programme obtained by our correspondent in Abuja on Sunday.

“FGN (Federal Government of Nigeria) is spending $1.5bn per year to fund tariff shortfalls and this could continue to rise if action isn’t taken,” the bank stated in the document.

The World Bank said Nigeria’s power sector was operationally inefficient with unreliable supply exacerbated by high losses and lack of payment discipline.

Picking on the various arms of the sector, the bank stated that power generation was characterised by high non-available capacity due to the fact that many plants were out on fault, damage, maintenance, major overhaul, etc.

“Gas and transmission constraints lead to non-operational capacity. Resolving policy/regulatory challenges and Disco (distribution companies) issues are key to free up stranded capacity,” the bank stated.

In the transmission sector, the bank said infrastructure in this arm of the industry remained inadequate and congested, stressing that investments in upgrades and maintenance were required.

In the power distribution arm, the bank observed that the Discos on average currently report 50 per cent Average Technical Commercial and Collection losses.

It said this was far above the less than 15 per cent international good practice and the 26 per cent that was allowed in the sector’s Multi Year Tariff Order.

The bank said, “For every ₦10 worth of electricity received by Discos, ₦2.50 was lost due to energy theft and poor distribution infrastructure.

“This reflects low investments in distribution networks and metering creating lingering liquidity challenges.”

On the policy and regulatory environment, the bank stated that there had been inconsistent implementation of tariff regulation, enforcement of market contracts, and policy direction.

It said Discos on average reported 50 per cent ATC&C losses which meant that only half of the energy generated led to collected revenue.

The bank stated that the capital expenditure allowance for all 11 Discos combined was N56bn and that this was far below what was needed.

On electricity access, the bank stated that Nigeria now had the largest number of un-electrified people globally and the trend was worsening.

It noted that of the electrified, the supply was very unreliable with widespread blackouts.

It stated that a holistic approach was necessary to address the power sector situation in a sustainable manner.

The bank, however, stated that it had proposed engagement to help address the concerns in Nigeria’s power sector.

It said the proposed engagement under two streams were aimed to provide holistic support for addressing key challenges through results-based lending.

FG questions accuracy of W’Bank survey on power situation

Meanwhile, the Federal Government has queried the report of a survey conducted by the World Bank which claimed that 78 per cent of power consumers in Nigeria get less than 12 hours of daily supply of electricity.

In a statement issued in Abuja on Sunday by the Special Adviser to the President on Infrastructure, Ahmad Zakari, the Federal Government said it was unclear what empirical evidence the World Bank used to arrive at the figures.

It insisted that power distribution to consumers was steadily improving, arguing that it was inaccurate to make a blanket statement that 78 per cent of Nigerians had less than 12 hours daily access.

Responding to the Power Sector Recovery Programme Opinion Research Fact Sheet released by the World Bank, Zakari argued that empirical evidence from the Nigerian Electricity Regulatory Commission showed that only 55 per cent of citizens connected to the grid were in tariff bands D and E which were less than 12 hours supply.

He said, “It is inaccurate to make a blanket statement that 78 per cent of Nigerians have less than 12 hours daily access. The data from NERC is that 55 per cent of citizens connected to the grid are in tariff bands D and E which are less than 12 hours supply.

“Those citizens are being fully subsidised to pre-September 2020 tariffs until Discos are able to improve supply.

“There is a N120bn CAPEX (capital expenditure) fund from Central Bank of Nigeria for Discos to improve infrastructure for these tariff classes similar to the metering programme that is ongoing.”

Zakari also kicked against aspects of the World Bank report which claimed that 58 per cent of electricity consumers in the country did not have meters to measure electricity use, dismissing the data as unverifiable.

He said, “It is unclear who did this survey and what the timeframe is. All citizens that have got free meters report they are happy about the reform trajectory.

“To date more than 600,000 meters have been delivered to Discos out of the one million in phase 0 with installation ongoing. Meters are sourced locally and are creating jobs in installation and manufacturing/assembly.”

The president’s adviser clarified that the service based tariff ensured that citizens paid more only when and if they were receiving high quality of service.

It noted that to achieve universal access to electricity by 2030, Nigeria would need to connect over one million households per year.

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