Nigeria’s Electricity Subsidy to Hit N2.4trn by End of 2024
•Ageing electric infrastructure worries power minister
•NBET disburses N8trn in 9 years
Oluchi Chibuzor
As Nigerians continue to expect steady supply of power, the financial implications of subsidising the industry is projected to hit N2.4 trillion by end 2024, with the Minister of Power, Adebayo Adelabu, ruing the challenge of ageing infrastructure.
Adelabu also revealed that recent increase in vandalisation is costing Transmission Company of Nigeria (TCN), around N10 billion, just as Nigerian Bulk Electricity Trading disbursed N8 trillion in nine years.
The figures were part of the key highlights that came out at the PWC’s annual power and utilities roundtable themed – ‘Reigniting Hope in Nigeria’s Electric Power Sector.’
Speaking at the event, the Minister of Power, Adebayo Adelabu, said the theme resonates deeply with the present administration’s collective mission to restore trust, drive innovation, inclusive growth and deliver tangible results in the power sector.
He said the present administration in Nigeria, led by President Bola Tinubu with the Renewed Hope Agenda, recognizes that energy is not merely a commodity.
Represented by his Chief Technical Adviser, Adedayo Olowoniyi, Adelabu, however, decried the ageing infrastructure and all other sectoral issues that makes managing the value chain difficult.
His words: “Part of the challenge we’ve seen in Nigeria is that getting stakeholder buy-in often is a challenge. And that is why managing the value chain, especially electricity value chain in Nigeria is a big challenge. We have so many participants that may not want to follow market rules.
“And it is absolutely critical that we are all following the rules and regulations that are created by the regulator, and actually focusing on making sure that we create an environment where we have the right level of market discipline.”
According to him, he believed that significant progress has been made by the government to set the sector on the path of growth.
He added: “We have made some progress in the past year in addressing some of the issues across the Nigeria power sector and setting the sector on the path for growth. To ensure the sustainability of the energy sector, the Federal Government of Nigeria has implemented a multi-pronged approach, spanning across legislation with the enactment of the Electricity Act of 2023.”
Recounting the impact of vandalisation on the already weak and aged infrastructure, he noted that TCN has spent around N10 billion to fix the destroyed towers across the country.
According to him, “Our successes have not been without its challenges. We have recorded frequent grid disturbances recently due to various factors, which include aging infrastructure, resource limitations, capacity inadequacy across the value chain, and predominantly a consistent vandalism experience on the transmission network across the country.
“When you have an infrastructure that is weak and dilapidated like the transmission infrastructure we have, and in addition to that, you have a significant level of vandalism; then the expectation is going to be exactly what we’re seeing today. I mean, people would not really understand the level of vandalism that occurs.
“In the last six months, TCN has probably spent close to N10 billion on fixing towers that have been vandalized. From a capital point of view, rather than using that capital to complete existing projects or looking at extensions and expansion, they are actually using this to fix lines that are being destroyed on a daily basis.”
Making his presentation, the Commissioner, Planning, Research and Strategy, Nigerian Electricity Regulatory Commission, Dr. Yusuf Alli, said that the cumulative electricity subsidy for 2024 would soon hit N2.4 trillion.
According to him, “From the beginning of this year, the subsidy per month was about N250 billion. When the action was taken in April to increase tariff for band A, that reduced it by over N100 billion.
“But unfortunately, there has been some level of backsliding in the macroeconomic environment. So right now, the best estimate that we have for 2024 is that the cumulative subsidy for the year will be N2.4 trillion.
“The implication is that the federal government, Ministry of Finance, would have to find the money to pay the generating companies because they are the ones right now that are not getting their full money arising from the shortfalls.”
The Acting MD/CEO, Nigeria Bulk Electricity Trading Plc (NBET), Mr. Johnson Akinnawo, revealed that they have disbursed N8 trillion since 2015.
He said they would continue to play the role of off-taker even and push for bilateral trading with their renewal for three more years.
According to him, “Since 2015 the market transaction that we have settled successfully without hitches is N8 trillion. The implication is that we are still in the market for another three years to continue to play the role that the government has put us to play.
“We expect us to continue to play our role, which is being a credible off-taker, supporting government policy and implementing government directives.”
He hinted that they would “transform to an energy exchange to further support the markets, drive the move for the market to go into bilateral, which is the market that is governed by contractual discipline.”
On the issue of state market, the MD of Benin Electricity Distribution Company, Mr. Deolu Ijose, advocated the need for the state governments to train their staff to understand necessary frameworks.
His words: “States must begin to think about capacity building for their workers and not just keep moving their staff from one destination to another to do regulatory work. However, the issue of cost variation and how it will work must be critically looked at.”
