FG Dashes Operators’ Hopes, Rules out Fiscal Subsidy for Power Sector
• Qualifies CBN’s N213bn market support fund as enough subsidy
Chineme Okafor in Abuja
The federal government has again stated that it would not provide any monetary support to the country’s power sector in the form of subsidy, thus ending hopes of a probable financial bailout from it which some of the industry’s operators have nursed.
Speaking on Wednesday night at the January 2017 edition of the monthly Nextier power dialogue in Abuja, the Minister of Power, Works and Housing, Mr. Babatunde Fashola explained that the government considers the N213 billion Nigeria Electricity Market Stabilisation Fund (NEMSF) provided by the Central Bank of Nigeria (CBN) as enough subsidy for the sector.
He stated that the CBN NEMSF was a low-interest loan which operators who are comfortable with its terms have accessed and used to upgrade their assets and services.
He thus said he was unsure about the repeated request by some operators in the market for government subsidy.
“Subsidy appears in different forms. When I resumed in this sector, I was made to understand there is an existing CBN fund for the market. The CBN fund comes at a low interest rate, if that does not qualify as subsidy, then I don’t know what else qualifies,” said Fashola.
He said the government was more interested in addressing the governance issues of the market which he noted were man-made challenges that can be fixed.
The minister also stated that the government would be willing to listen to and help operators who have partners that could support their operations, with their contractual agreements and negotiations but not giving out monies to them.
While the CBN in collaboration with the government initiated the NEMSF in 2014 to help the sector attain a contract based market following operators’ signing of Power Purchase Agreements (PPAs) and vesting contracts with the Nigerian Electricity Bulk Trader (NEBT), some operators mostly the electricity distribution companies (Discos) have frequently called out to the government to provide the market financial subsidy as reportedly agreed by parties during the privatisation exercise.
As at 2016, the CBN fund has however been disbursed to 24 industry participants which include three Discos, 14 generation companies (Gencos) including the National Independent Power Plant (NIPP), one service provider, and six gas companies to address their financial challenges.
Fashola also spoke on other issues affecting the sector. He reiterated the government’s firm position on keeping with the privatisation of the sector, saying it was not considering the repeated calls for its cancellation.
On retail electricity tariff, he explained that Nigerians would have to come to terms with the realities of the country operating a privatised electricity market which regular tariff reviews was one of its features.
“Tariff review is part of the realities of privatisation. One of the prices of privatised power is that subsidies are hard to get and tariffs have to come. Tariff reviews are continuing developments in the sector because inputs change.
“Again, I have to say this, the reviewed tariff can either go up or come down, and tariffs won’t solve the problems of the Discos as at today,” he stated.
