The Chairman of the Nigerian Electricity Regulatory Commission (NERC), Engr. Sanusi Garba has disclosed that the commission’s tariff reform programme and introduction of Service Based Tariff (SBT), have conserved over N1trn for the federal government’s annual payment.
Garba, who spoke in Abuja at the recent Power Sector Ministerial Retreat, said the reform also reduced the FG’s subsidy obligation from N528 billion in 2019 to N155 billion in 2022.
He explained that the N155 billion in 2022 translates to 23 percent of the “Business As Usual” projection – ₦665bn) which the federal government would have been expected to cough out for tariff subsidy payment.
The NERC boss also noted that the commission had also improved electricity market liquidity as it achieved 198 percent growth in revenues.
Presenting statistical data, he disclosed that revenues grew from ₦282.20bn in 2015 to N841.81bn in 2022; remittance increased by 258 per cent growth from ₦173.16bn in 2015 to ₦619.50bn in 2022, while growth in VAT collection showed 315 per cent growth from ₦13.44bn in 2015 to ₦55.83bn in 2022.
According to the NERC Chairman, “Between Jan 2020 and Jan 2023, tariff increased from 55% of cost recovery to 94%.
He said that “without the tariff reviews that commenced in 2019, subsidies payable by the government would have grown to about a trillion naira per annum by 2023. Service-Based Tariff (SBT) was instrumental in the transition to cost-reflective levels.
“Annual subsidy reduced from N528bn in 2019 to N144bn in 2022. Subsidy in Jan-April, 2023 stood at N57Bn. Service-Based Tariff (SBT) was instrumental to the reduction of tariff subsidies.
“The financial burden of tariff subsidies from 2015-2022 stood at NGN2.8tn while estimated subsidy for 2023 is circa N600bn +.”
He raised concerns over the current exchange rate of the Naira and inflationary trend, saying the unification of Forex and current inflationary pressures in 2023 has pushed cost-reflective tariffs to N124/kWh.
Garba also canvassed for policy support to review end-user tariffs to minimize fiscal burden and proposed to implement automatic monthly tariff adjustments to manage volatilities in Forex and inflation rates.
