The convener of PowerUpNigeria, an electricity consumer right advocacy group, Adetayo Adegbemle, has stated that the operationalisation of the Power Consumer Assistance Fund (PCAF) will solve the liquidity crisis in the electricity sector.
Adegbemle, in a statement, noted that the freeze of end-user tariff policy, which had been in effect since December 2022, has created a wide gap between cost-reflective tariffs and the rates charged consumers, resulting in a massive monthly subsidy burden of approximately N262bn by the federal government.
He said this has led to only 9.5 per cent of GenCos’ invoices settled from the market, leading to cash flow shortages that caused gas suppliers to curtail supplies.
“NERC’s intervention in April 2024 brought temporary relief by unfreezing tariffs for Band A customers—those guaranteed 20 hours of electricity supply daily. This adjustment increased market payments to 49.5% and reduced the monthly subsidy to N153bn.
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“However, resistance to further tariff adjustments and the government’s reluctance to revise rates for lower bands have stalled progress. By December 2024, market payments were projected to decline to 39 per cent, with subsidies increasing to N200 billion.”
He however said the implementation of the PCAF which was established under the Electricity Act of 2023, offers a transformative approach to resolving NESI’s liquidity challenges.
“Unlike traditional subsidies, which blanket the entire sector, PCAF is designed to provide targeted financial support to electricity consumers while allowing Distribution Companies (DisCos) to charge cost-reflective tariffs.”
Adegbemle explained that the fund would be financed through contributions from the government and eligible customers, with rates and durations determined by NERC.
“Initially, all customers will receive support through PCAF, reducing the financial burden during macroeconomic volatility. As economic conditions stabilise, the fund will prioritize underprivileged customers, with a minimum monthly subsidy of N5,000 per customer, equivalent to 25kWh of electricity. Low-income consumers using less than 25kWh monthly will effectively enjoy a full subsidy, ensuring affordability while promoting efficient energy use.”
He added that one of the most significant advantages of PCAF is the clarity it offers as consumers would have a clear understanding of how much financial support they receive from the government to offset their electricity bills and enable DisCos to charge cost-reflective tariffs to cover operational costs and meet their financial obligations to GenCos.
“This eliminates the persistent cash flow issues that have plagued NESI, fostering a more resilient supply chain,” Adegbemle stated.
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