Nigeria Borrowed N1.3 Trillion To Fund Electricity Sector In Four Years

Nigeria borrowed a total of N1.3 trillion (US$3,170,731,590.00) since 2017 to ensure that generation companies and gas suppliers received adequate funds to continue generating electricity.

A local newspaper, The Punch quoted a report by World Bank titled ‘Resilience Through Reforms’ as saying.

The World Bank said Nigeria’s power sector will cost the Federal Government an additional N3.08 trillion through 2023 if current performance levels and low tariffs persist.

“To ensure that Gencos and gas suppliers receive enough payments to continue generating electricity, since 2017, the FGN has borrowed a total of N1.3tn ($4.2bn).

“In 2019, total FGN support reached N524bn ($1.7bn), 0.4 percent of GDP – higher than the N428bn budget for health and just 20 percent less than the N650bn budgeted for education.”

The Bank noted that even though all the six generation companies and eleven distribution companies have been privatised, the Federal Government, through the Nigerian Bulk Electricity Trading Company, buys electricity from the GENCOs and independent power producers before reselling to the Discos.

According to the Bank, government through the Nigeria Electricity Regulatory Commission regulates tariff in the sector instead of allowing market forces to determine it.

It added that the transmission company of Nigeria was still strictly government-owned.

Nigerians pay less than the cost of production for electricity, the report said, adding that this resulted in revenue shortfall.

From 2015 through to 2019, the FG paid N1.68tn as cumulative tariff shortfall, it said, adding that because of foreign exchange depreciation and rising domestic inflation, tariff shortfalls had also been on the rise.

The bank said, “Every Nigerian who receives electricity from a Disco pays less for electricity than the cost of supplying it.

“However, 80 percent of the spending on tariff shortfalls benefits the richest 40 percent of the population; only eight percent benefits the bottom 40 percent, and of this, less than two percent benefits the poorest 20 per cent.

“Significant resources spent on funding tariff shortfalls disproportionately benefit the relatively wealthy who have access to the grid and use more electricity so that ultimately, a big chunk of government’s support goes to those who do not really need help with paying bills.”

The Bank said that 43 per cent of the population i.e. 85 million people lacked access to grid electricity, making Nigeria the nation with the world’s largest energy access deficit.

Source: www.energynewsafrica.com