Govs Advise FG To Phase Out Electricity Subsidy

Nigeria Governors’ Forum (NGF) says the federal government should stop the payment of electricity subsidies saying it is “ineffective”.

The state governors made this known on Monday in a document seen by TheCable titled ‘Development of the National Integrated Electricity Policy & Strategic Implementation Plan: Policy Recommendations by State Governments to the Federal Ministry of Power’.

“Electricity is a commodity and a product that must be paid for by consumers. The States believe that electricity subsidies and other forms of financial interventions in the power sector by the FG over the last 15 years have been inefficient and ineffective so far,” NGF said.

“Rather than improve the quality and reliability of service, electricity subsidies in the sector have been applied to cover inefficient costs and lack of service by DisCos, TCN, GenCos and gas producers across the NESI.”

In the document, the state governments recommended a series of policies to tackle the challenges within the power sector.

The recommendation comes at a time when regulatory authority is being transferred to states.

In April, the Nigerian Electricity Regulatory Commission (NERC) transferred oversight of the electricity market in Ondo, Ekiti and Enugu to each state’s electricity regulatory bureau.

According to the document, the states recommended that wholesale and retail electricity subsidies to customers and across the Nigerian Electricity Supply Industry (NESI) value chain be reduced and eventually eliminated over time.

“Moreover, the so-called electricity subsidies benefit only customers who are connected to the national grid and enjoy some form of supply reliability. Millions of households, particularly in underserved and unserved communities, pay more than twice the average true cost of on-grid supply,” the states said.

“The 2001 national electric policy recommended the restricted use of subsidies for the promotion of universal access to electricity. States agree with the retention of this policy.

“To this end, States recommend that wholesale and retail electricity subsidies to customers and across the NESI value chain are reduced and eventually eliminated over time, except for pre-defined customer categories or in line with national economic growth initiatives.

“Where electricity subsidies are deemed necessary, the States propose a cost-of service analysis which will be conducted by the state to determine the cost of supply and arising electricity subsidies for each state.”

The NGF further said if subsidies must continue to be implemented as a specific policy of the federal government, there must be a provision for funding the subsidies before implementation.

The forum also asked the federal government to be transparent and precise in its regulatory framework to determine the extent of subsidies required and the category(ies) of consumers that would be eligible to receive electricity subsidies.