By Olusegun Olanrewaju with agency report
Experts in the financial sector have advised the Federal Government not to remove electricity subsidies, saying such an act can lead to tough economic conditions.
In separate interviews yesterday, in Lagos, a lecturer of Economics at the Pan-Atlantic University, Prof. Bright Eregha, advised the government not to contemplate the removal of the subsidy because of the current economic hardship.
“The people are already grappling with too many economic distortions which have led to the cost of living in the country.
“Then removing the subsidy on electricity will raise the inflation rate and worsen the people’s economic plight.”
Eregha said the government should focus more on improving the challenges of the energy sector, rather than proposing the removal of subsidies.
He added that the Federal Government should be honest and dialogue with the people to assuage doubt, particularly at this period of economic austerity.
“This will reduce the distrust in government policies and enable the people to key into their programmes,” the university don said.
Also speaking, the President of the Standard Shareholders Association of Nigeria, Godwin Anono, stressed that the policy to remove electricity subsidy was not properly thought out.
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“The policy will not achieve its desired objectives because the country’s power situation is yet to be improved upon.
“We barely have steady electricity, and the authorities are clamouring for subsidy removal in the country,” Anono said.
According to him, the government should be more concerned about providing pre-paid meters to prospective electricity consumers before implementing a new tariff regime.
His words: “Implementing the proposed policy without addressing the metering challenges will be exploiting the people without any regulatory protection, which isn’t the right things to do at this era of economic difficulties.”
The Minister of Power, Adebayo Adelabu, had said that the removal was initiated for effective energy administration.
Adelabu proposed that President Bola Tinubu’s administration ensure removal of electricity subsidy for effective utilisation of energy in the country.
Speaking at the opening of the month when he visited the 750-megawatts (mw) Olorunsogo Power Generating Plant in Ogun State, and the 500mw Omotosho Generating Plant in Ondo State, as part of his nationwide inspection visit to power installations of the Federal Government, Adelabu expressed concerns over the poor electricity supply situation in the country caused by numerous issues, including outstanding subsidy debts.
He advocated that Nigeria should migrate to a full cost-reflective tariff regime ”if the Federal Government cannot pay for subsidies owed to the market”.
The Background
Adelabu also stated that the National Independent Power Plants (NIPPs) being operated and managed by the Niger Delta Power Holding Company Plc (NDPHC) were currently suffering under-capacity utilisation of below 25 percent due to gas supply constants.
“We have been to Olorunsogo and we are now in the Omotosho Power Plant. These are big power plants. I am impressed with the size and the technology of the power plants here. Their operational history is also impressive,” he said.
The minister added, “And I am amazed at the level of underutilisation of these power installations. Each of them operates below 25 per cent capacity, when we are still complaining that power generation is low in this country. The under-capacity utilisation is due to a variety of reasons.
“The major part of it is the shortage in gas supply to these installations, which is why I needed to see these plants myself, to look at what we can do to improve the operational capacity of these plants.
Speaking about turbines to generate more power for the country, he said, “What can we do to support these power plants to operate at impressive capacity, so that power supply will improve nationwide?”
He said he would later engage with the management of the power companies to effective means of partnership and cooperation such that the Federal Government could support them to improve their operational capacity, and consequently improve the level of power supply to the distribution companies.
He also observed that the government-owned generating companies were currently undervalued, arguing that a number of works needed to be done on them by the government to bring them back to higher capacity and improved valuation before they could be sold.
Adelabu said if the plants were sold in their current state, the country would be losing, maintaining that Nigeria had invested so much in those power installations that have only existed for 12 years.
In dealing with the gas supply challenge, the minister said there was a need for a roundtable meeting and collaboration with the Minister of State for Petroleum (Gas) in order to ensure that gas supply to the Gencos was regular, and ultimately solve the issue of under capacity utilisation of the plants.
On the removal of electricity subsidy, Adelabu said Nigeria should migrate to a full cost-reflective tariff regime if the Federal Government cannot pay for subsidies owed to the market.
He said, “And we also want to appeal to the federal government that once there is a subsidy promise, it has to be fully funded. If our government is not ready to fund electricity subsidies, it is actually better for us to migrate to a fully-cost-reflective tariff, because liquidity is a major issue in the sector, which has led to a huge debt being owed to power generating companies.
“And once they are owed, they are also unable to pay the gas suppliers. When the gas suppliers are not paid, they will be unwilling to supply regular gas to them.
“So where are these debts piling up? Where are they coming from? Part of it is that the Discos are owing some portion of these debts while the federal government is also owing a huge portion of these debts, which relate to the unfunded portion of the subsidy that they pledge.
“So, I will do everything within my capacity. I have already had a meeting with the Honourable Minister of Finance and Coordinating Minister of the Economy as well as the honourable Minister of Budget and National Planning, and the Special Adviser to the President on Energy, on how we can fund the outstanding electricity subsidy unpaid by Federal Government.”
