Insists on full electricity subsidy removal
Govt upbeat about evacuation of 7,000mw by year end
By Emmanuel Addeh
The federal government at the weekend assured Nigerians to expect an improvement in power supply soon as the $1.6 billion earmarked for the expansion and rehabilitation of the country’s transmission network is now ready for disbursement.
It also foreclosed reviewing the withdrawal of subsidies in the power sector, saying the policy is no longer sustainable.
It added that the World Bank, in collaboration with some agencies in Nigeria, are helping in working out an exit route on the subsidy payment.
Director of Renewables and Rural Power Access, Mr. Faruk Yabo, who spoke on NTA, alongside the Special Adviser on Policy to the Minister of Power, Mr Abba Aliyu, on the ministry’s projections for 2021, explained that the federal government’s target of hitting 7,000 megawatts by the end of 2021 through the Siemens intervention programme is still on course.
Yabo said whereas January and December are usually characterised by serious power outages, due to changes in water level, 2020 was different, with the achievement of an all-year peak of 115mw per hour on December 11.
He attributed the “feat” to rejigging and realignment of the Nigerian Electricity Supply Industry (NESI) by the Ministry of Power.
“Looking ahead, the ministry has five key focus areas, which if judiciously pursued, will lead us to better prospects. Number one is the issue of addressing the liquidity problems of the sector.
“It is very important for the sector to exit the current subsidy regime and happily enough, based on policies under the power recovery programme, the World Bank and other agencies are working with the sector to actually create an exit route through providing loans.
“These loans will allow for capping out of the subsidies in terms of the shortfall in the electricity market that will still allow for the payment of the generation, transmission and distribution cost, including metering, without having to continuously maintain the status quo. This is being vigorously pursued by all stakeholders.
“Second, is that the issue of alignment of the value chain will be dealt with. As we speak, we have about 13,000mw installed capacity, whereas generation and transmission stand at 8,000mw.
“Meanwhile, the total delivered peak power remains at 5,500mw, so the Siemens programme, which is coming to align the value chain, is one of those things we need to see, but the target is that by the end of 2021, we will have 7,000mw, by 2023, we will have 11,000mw and by 2025 we should have 25,000mw.
“This is being strongly complemented by the current TCN transmission and rehabilitation expansion programme, which is also heavily supported by the donors. I think we have currently about $1.6 billion available for this particular work,” he stated.
He explained that in the last 15 years, the electricity supply trend has not witnessed what it did last year, noting that instead of power shortages, supply actually increased during December 2020 and January 2021.
He added: “We have seen a new trend, which is quite amazing. In this time of the year, from between December and January, we usually have very poor power supply, but it seems we have added more competencies and hit new targets, which is quite unusual in the history of the power sector.
“On the 11th of December, we had the highest generated power on any day of the year which is well over 115 megawatt/hour. “This was up from another peak that was reached in April, which was around 112 megawatt/hour.
“Now the dams are supposed to be going down, we have a lot of challenges importing equipment because of the restrictions on travels. So, having the highest peak in this kind of period, I will rather say that in the last 15 years this is a new trend.
“I believe this is courtesy of some of the things that happened in 2020.”
The director said the issue of tariff is a largely legal issue, stressing that the manner of tariff increases is enshrined in the Electric Power Sector Reform of 2005 and requires as of law, a balance between customers and investors.
According to him, while it is difficult to determine whether or not the industry has achieved a cost reflective tariff regime, it remains an issue of the “chicken and the egg”.
“It will be very difficult for a country like ours with so many demands to continue to pay trillions of naira in terms of subsidies. We can all see that on account of technological advancement, sources of power supply like solar have continuously become cheaper and as we speak, a lot of countries are getting their supplies much lower than the current tariff that we have.
“I foresee, going forward, that as we expand and aggregate, the tariffs are likely to be more reasonable. It is really important for the regulators to continue to insist that only those customers that are premium customers will be affected by this tariff increase at this time,” he stated.
In his remarks, the special adviser to the minister identified one of the key problems facing the sector, which the current administration inherited, as the misalignment in the electricity value chain.
“You have generation of about 13,000 megawatts, transmission of less than that and what can be generated of between 7,000 to 8,000 megawatts as well as a distribution that is far less than what can be transmitted,” he stated.
Aliyu explained that the federal government’s solar home system scheme will generate 250 direct jobs, adding that the power sector is currently undergoing reforms that will bear fruits in 2021.