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FG Moves to Checkmate Abuse of N224bn Naira Electricity Subsidy

13 Jan 2013

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Vice President Namadi Sambo


Chineme Okafor
The federal government has put in place measures to forestall possible electricity crisis that could have emanated from the poor management of billions of Naira budgeted as subsidy in the cost-reflective Multi Year Tariff Order (MYTO) framework.

In a swift reaction to the report that about N178 billion approved as electricity subsidy, intended to last from 2008 to 2011, as well as an additional N46 billion budgeted in 2012 may have been mismanaged by operators in the Nigerian Energy Sector, (NESI), Vice President Namadi Sambo on Friday set up a committee to address widening gap in energy delivery across the as well as payment for such energy deliveries.

THISDAY checks showed that the last week’s intervention was a last minute attempt to save the country from the impending collapse of services in the power sector as the subsidy allocated had been diverted to other uses, exposing the distribution to huge indebtedness.

Accordingly, the committee which include the Minister of State for Power, Hajia Zainab Kuchi, Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi, Director of Budget Office, Bright Okogu, the Transmission Company of Nigeria (TCN), Chairman of the Presidential Task Force on Power (PTFP), Beks Dagogo-Jack and the Market Operations of TCN,  would have to work out measures to address such issues of delay or non-payment for the electricity supplied by the various Power Holding Company of Nigeria (PHCN) distribution companies.

The committee which was inaugurated by Sambo in Abuja is expected to submit its report within a week.

A member of the committee, Dagogo-Jack, in an interview with one of our correspondents last night explained that the subsidy, which has a two-year lifespan, is expected to provide cash to the market given the realisation that electricity consumers may not be able to afford the total cost of electricity while a transition from government to the private sector is taking place.
“Government has realised the fact that the tariff could be too higher for consumers. That is why government is paying a percentage so that the consumers will pay the other half.

“The problem is that if such subsidy does to get to the DISCOs, they will not be able to run their businesses,” the taskforce chairman said, a development he blamed for the breakdown of some power plants in the recent time.

According to him, the subsidy does not belong to the DISCOs alone. Part of the money has to go for the settlement of energy and gas, saying that if the DISCOs fail to pay for the gas and energy supplied, there will be problem and the whole nation will be plunged into darkness.

The committee, he said, is meant to instill discipline in the distribution of the subsidy payment.

He explained that the subsidy arrangement was intended to bridge the gap between the real tariff and the difference which would be borne by consumers. 

However, Senior Special Assistant on Media and Publicity to the Vice President, Mfon Udott however explained that the measure was to address recurring issues in the MYTO tariff framework.

Sambo noted in the statement that the government was worried over accumulated debts in the sector and has thus decided to set up the technical committee on MYTO as well as a committee that has the Ministry of Power and PTFP, to assign accounting efficiency officers to PHCN distribution companies and also come up with a suitable structure for the Market Operator.

A source in the presidency who spoke to THISDAY on the development also explained that the government was forced to take such step when the Ministry of Power seemed to have vied funds earmarked for 2012 electricity subsidy into settlement of PHCN historical debts without a presidential approval. The move was however resisted by NERC which raised a red-flag indicating possible foul play in the process.

The source said: “Federal Government had set aside N46 billion for electricity subsidy for the year 2012; N11.5 billion was released three months ago and the balance was released in early December 2012.

But the MO did a major turnaround to pronounce that the N46 billion subsidies does not apply to MYTO-2 which came into effect in June 2012, citing a technicality that since the tariff regime commenced mid-year, the funds would no longer apply. Together with the ministry, the MO said that the N46 billion will instead be used to offset historical debts of PHCN, so what happens to NELMCO?”

“NERC in this regard raised a red-flag to say no to the move. The Commission requested the ministry to provide it with a presidential directive on that move and that it would not approve such move considering that the fund was purposely earmarked and that was where the disagreement started.

Debt settlement shouldn’t be a bad thing but imagine if Egbin suddenly found itself with N5 billion-the possibilities are huge. This may create a conduit for mis-appropriation. But more importantly, the industry will experience a setback. You cannot divert funds earmarked for current gas supply payments to settle historical PHCN debts; NERC refused to buy into that,” the source disclosed further.

Also, Udott stated in the statement that Sambo directed the committee through the Market Operator to release funds to address the issue of salary, metering, payment for gas and other infrastructural needs to boost power supply as regards the difficulties in payment of salaries to the staff in Yola Distribution Company.

Tags: News, Nigeria, Featured, Electricity Subsidy

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