By Yange Ikyaa
Tariff shortfall payment in the Nigerian power sector has been cut down from a historic accumulation of N1.891 billion to N247 billion in 2021, industry data linked to the Nigerian Electricity Regulatory Commission (NERC) has shown.
The Commission has been working towards phasing out power sector losses on all fronts and it recently launched a website for the Power Sector Recovery Programme (PSRP). NERC has also projected Nigeria’s power sector debts are billed to be eliminated by December 2022.
The PSRP is a broad reform programme to enhance power supply, restore financial viability, and improve accountability and transparency in the power sector. While stating an overview and update of the PSRP, Belije Madu, who works at the PSRP Secretariat, said the power sector issue or challenge in Nigeria is centred around technical, financial, and commercial components that require synchronization.
NERC Chairman, Engr. Sanusi Garba, stated that the power sector reform initiated by the Federal Government began as far back as 2005 with the creation of the Electric Power Sector Reform (EPSR) Act, which is the legal basis for the reform itself. He emphasized that the present state of the electricity distribution (DisCos) led the government to develop a policy document with several actions and deliverables, and funding to recover the sector.
“Recovering the DisCos from the state where they are, requires so much to be done and not only in terms of funding but also in terms of corporate governance and capacity building,” he said.
The NERC chairman further urged Nigerians to visit the PSRP website, which he described as a platform aimed at interacting with Nigerians to get feedback on the issues and challenges of the power sector in Nigeria. He noted the website provides a channel of communication to enhance conversation and dialogue on what Nigeria is doing to get the power sector to function.
Nigeria is constantly faced with the challenge of electricity consumers not paying for the energy they consume, while others are willfully engaged in energy theft. In the period between 2015 and 2020, the Federal Government revealed in its Power Sector Recovery Programme and Policy Interventions Nigerians failed to pay a total of N2.4 trillion for the quantum of electricity they consumed.
In the report, the government explained that the unpaid electricity bills by power consumers in the six-year period caused an unsustainable financial burden in the power sector. It specifically noted that in 2017, for instance, electricity tariffs could not cover the cost, even at zero Aggregate Technical Commercial and Collection losses.
The PSRP was approved by the Federal Executive Council in March 2017, with further amendments in 2019, including strategies to eventually phase-out Federal Government support to the electricity market.
The Nigerian power sector has been faced with tough liquidity difficulties since the distribution and generation arms of the industry were privatized in November 2013.
Power generators and other market participants constantly lament about the failure of distribution companies (DisCos) to remit the complete amount required for the smooth operation of the sector. The DisCos collect electricity tariffs from end-users and are required to make stipulated remittances to the Nigerian Bulk Electricity Trading Plc and the Market Operator, which is necessary in settling the bills of other industry players throughout the electricity value chain, including electricity generation companies (GenCos) and the Transmission Company of Nigeria (TCN), among others.
In this vein, the Payment Assurance Facility (PAF) of N701 billion, which is supported by the World Bank, was provided as loan to NBET to ensure that GenCos are paid the monies owed them in order to maintain operations for the period from 2017 to 2018 in view of insufficient remittances by DisCos due to non-cost-reflectivity of tariffs.
The Federal Government later approved an extension to the PAF with additional N600 billion, subject to the accountability framework that includes provisions for minimum remittance requirements as contained in the successive tariff orders issued by NERC.
