FG Spends N1trn On Electricity Tariff Subsidy In Two Years

The Federal Government has spent N1trillion on electricity tariff subsidy between 2019 and 2021.

The amount represents the gap between the Cost Reflective Tariff (CRT) and Allowable Tariff (AT), which peaked at N28 per unit of electricity supplied to consumers.

Government explained that the amount was largely responsible for liquidity crunch in the power sector as well as the poor power supply in the country, noting that because of this, it was planning to re-align its policies, regulations and the activities of the power sector operators as a means of improving electricity supply.

At the 12th edition of PwC Nigeria’s Annual Power and Utilities Roundtable, Special Adviser to President Muhammadu Buhari on Infrastructure, Ahmad Zakari said that the nation needs to optimise the potentials in the power sector through a cost-reflective tariff regime.

He noted: “We need a holistic review, the first thing is regulatory and policy alignment. Through this measure by the government, we can eliminate the gap in service based tariff. At this time, Distribution Companies(DISCOs) with the revised economic models, will be faced with incentives and penalties that would allow them to be able to achieve optimisation. The second phase will now be infrastructure alignment. If the economics of tariff-base works, then infrastructure will be improved.

“With cost-reflective tariff everything will fall in place in the power sector. From the government’s perspective as we migrated towards this, we have understanding that more needs to be done. For instance, our cost reflective tariff (CRT) versus allowable tariff (AT) gap reached a peak of N28 gap in 2019, at that rate, between that period and 2021 alone, we would have recorded N1trillion in tariff shortfall or subsidy.”