A report from global accounting and consulting firm, PricewaterhouseCoopers (PwC), has revealed that the Nigeria government spent a total of N2.3 trillion on subsidizing the consumption of petrol and electricity from 2015 to 2018.
The report was presented to power sector stakeholders at a roundtable organised by Mainstream Energy Solutions- operators of the Kainji and Jebba hydropower generation companies (Gencos), by the Chief Economist of PwC Nigeria, Dr. Andrew Nevin.
According to Dr. Andrew Nevin, the report noted challenges of Nigeria’s electricity sector and potential solutions to them. It equally indicated that the country spent N1.12 trillion as electricity subsidy and another N1.2 trillion on petrol.
The report noted that both subsidy expenditures within the review period represented 17 percent of Nigeria’s current foreign reserves and 26 percent of 2019 federal budget.
It said: “The federal government has expended about N1.2 trillion as petroleum subsidy over the past four years (2015-2018). The tariff shortfall in the electricity sector which technically is the electricity subsidy payable by the federal government stood at N1.12 trillion between 2015 and 2018.
“Both subsidies amount to N2.3 trillion, which represents about 17 percent of current foreign reserves and 26 percent of the 2019 budget.”
The PwC report stated that the total electricity subsidy for the four years could cover the current budget of the ministries of health and education.
It added that electricity distribution companies (Discos) have steadily reported losses since they took over the distribution assets from the government at the conclusion of the power sector privatisation in 2013.
“In addition, there has been a steady growth in the amount of loss reported. In 2017, the total loss reported by Discos stood at N417 billion.
“Liquidity crunch is the biggest challenge of the Nigerian electricity sector today. The 11 Discos have been struggling to meet their obligations to the Nigerian Bulk Electricity Trading Plc (NBET) and Market Operators (MO) as evidenced in their low remittances to NBET and MO,” the report stated.
According to it, in the first quarter (Q1) of 2019, only about 28 per cent of the N190 billion invoice comprising invoice of N161.4 billion for energy purchased from the NBET and an invoice of N28.8 billion for administrative services from MO, were remitted by the Discos.
“In one year (Q1’2018 – Q1’2019), Discos’ outstanding remittance to NBET and MO stood at about N523.8 billion and N80.3 billion respectively.
“Consequently, NBET has in turn been unable to meet their obligation to the generation companies (Gencos) thus creating a liquidity challenge that has plagued the electricity industry since the privatisation exercise in 2013,” it added.
The report noted that the proportion of remittances relative to market invoice were low across all the Discos, indicating that none of the Discos could attain 50 per cent of the total bill they owed for electricity supplied to them.
“This situation creates liquidity challenges to the generation and transmission segment of the industry,” it said, adding that it is believed that metering customers will reduce the liquidity challenges of the country.
“But meter delivery progress has been slow so far. Abuja, Benin and Port-Harcourt are the Discos that currently have more than half of their customers metered. Yola Disco recorded the slowest metering progress (21 per cent) of all Discos as at Q1’ 2019.
“Progress in metering customers will help to reduce ATC&C (Aggregate Technical Commercial and Collection) losses and billing collection inefficiencies in the sector,” it said.
Indicating that the tariff shortfall in 2018 by the 11 Discos amounted to N384 billion, the PwC report also stated that the average aggregate technical, commercial and collection loss in 2018 was 52.7 per cent.
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