FG to spend N600bn on electricity subsidy in 2023

The federal government might have to pay N600bn as electricity subsidy in 2023.

The Chairman/CEO of the Nigerian Electricity Regulatory Commission (NERC), Engr. Sanusi Garba made the disclosure  at the ministerial retreat on the Integrated National Electricity Policy and Strategic Implementation Plan which was in Abuja yesterday.

Garba said the increase is despite the government’s annual subsidy being reduced from N528bn in 2019 to N144bn in 2022.

He added that the Service-Based Tariff (SBT) was instrumental to the reduction of tariff subsidies but the financial burden of tariff subsidies from 2015-2022 stood at NGN2.8tn.

He said the major challenge in the sector is the insufficient end-user tariffs, poor DisCo collections, and revenue shortfalls, which have served as a threat to investments and the sector’s viability.

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Also speaking at the event, the Minister of Power, Adebayo Adelabu said there is the need to create another company from the Transmission Company of Nigeria (TCN) to strengthen its effectiveness in transmitting power from power generating companies to electricity distribution companies.

Adelabu said the use of ageing and dilapidated infrastructure by the TCN has made it unable to transmit enough power needed.

While decrying the dismal performance of TCN in the electricity supply industry, he noted that the way out of the inefficiency is to balkanise it into two.

“In the Nigerian Electricity Supply Industry (NESI), the transmission sub-sector has been identified as a critical weak point in the value chain lately, a view widely shared. To align with the Electricity Act, 2023 and the industry’s demands, it’s time to restructure the Transmission Company of Nigeria (TCN) into two entities: the Independent System Operator (ISO) and the Transmission Service Provider (TSP).

“This restructuring must synchronise with the evolving landscape of State Electricity Markets, addressing calls for the decentralisation of the national grid into regional grids interconnected by a new higher voltage national or super-grid.”

According to him, the nation now generates over 98 per cent of electricity through renewables as against the 70.5 per cent generated last year.

“As of 2022, 70.5 per cent of our grid electricity was generated by thermal plants, 27.3 per cent from hydro, whilst solar and other power plants made up 2.2 per cent. The good news here is that over 98 per cent of the feedstock powering electricity generation in the country are transition or clean fuels, as Nigeria ramps up capacity to generate more electricity through renewable means such as solar, hydro, wind, bioenergy and others” he said.