Why FG opted for electricity tariff review

Federal Government resolve that it would not make available the entire N800 billion representing the shortfall in the payment the Discos are supposed to pay for the services of generation and transmission companies for 2020 and 2021, has forced it to agree for a tariff review that will be implemented this Wednesday, industry sources say.

Even though the actual allowable revenue for the entire value chain was not made available, the N800 billion, BusinessDay learns, was arrived on as the shortfall from the total allowable revenue needed by the power industry by the stakeholders.

Having presented the figure to government by stakeholders, the government is said to have pointedly told Nigeria Electricity Regulatory Commission (NERC), which oversees the industry, that the amount was too high and it can only make available about N340 billion, and insisted that the market must make up for the balance of N440 billion for the fiscal year 2020 and 2021.

According to sources close to the government, most often the government subsidises electricity consumed by Nigerians through interventions that balance up the financial shortfall of the Discos as regard their commitment to generation companies and Transmission Company of Nigeria (TCN) through the Nigerian Electricity Bulk Trader.

It was as a result of these interventions that the government had been reluctant all this while to allow for tariff review, because it fears there could be a backlash.

Initially, the shortfall of the amount due to generation and transmission companies was N214 billion in 2015. There was another N701 billion in 2018. This was followed by another N600 billion from the Central Bank of Nigeria in 2019.