Media report that the leadership of the National Assembly on Monday waded into the controversy on the planned hike in electricity tariffs effective from today, July 1, 2020, and succeeded in convincing the Distribution Companies (DISCOs) to defer the plan till the first quarter of 2021 is a welcome and commendable development. The proactive measure by the legislative arm of the federal government indeed portends a good omen in the evolution of Nigeria’s democracy and good governance.
Senate President Ahmed Lawal, Speaker of the House of Representatives, Rt. Hon. Femi Gbajabiamila, and other principal officers of the two chambers met at the National Assembly with the chief executives of the government electricity regulatory body, the Nigerian Electricity Regulatory Commission (NERC), and the DISCOs across the country. Also in attendance were the chairmen of the committees on power from the Senate and House of Representatives.
The National Assembly leaders were emphatic at the meeting that the timing of the planned hike was wrong even though they had not much issue with the need to introduce cost reflective tariffs for the power sector to attract the much needed investment. The DISCOs too admitted that they were not well prepared for the planned hike in tariffs despite announcing the increase earlier. The meeting agreed to defer the planned hike till the first quarter of next year while the leadership of the National Assembly promised to meet with President Muhammadu Buhari on the issue.
However, the representatives of the DISCOs said if the planned hike is eventually deferred till next year, the government should continue to bear the difference in the present tariff and what was considered as the appropriate tariff. The Minister of Power, Sale Mamman, had earlier last month insisted that the new increment on electricity tariff will take off in July despite the rising cases of the Covid-19 pandemic and its adverse effect on the national economy, corporate organisations and individuals.
Mamman said at the investigative public hearing on power sector recovery plan and the impact on Covid-19 pandemic, organised by the Senate Committee on Power that the impact of the Covid-19 pandemic had also affected the plan for the repositioning of the electricity market towards financial sustainability under the Power Sector Recovery Programme. He said following the completion of public consultation on tariff review, the regulator, NERC had initially planned to conduct a tariff review in April 2020.
However, he said due to the Covid-19 outbreak and customer apathy, the proposed tariff review was delayed by three months. “The impact of this means the subsidy being incurred in maintaining the current tariff level had to be maintained till July 2020 when the proposed tariff review will be implemented. The challenge we are currently facing in the development and expansion of our transmission line is the budget and release of the federal government’s commitment in the estimated sum of N32 billion primarily for Right of Way acquisition and environmental impact mitigation. The fund should be provided for in the 2020, 2021, and 2022 Appropriation of the Ministry of Power”.
Mamman also said the Covid-19 pandemic had a great economic impact, not just on the health sector, but the overall economy of the country. “Indeed, the prevalence of the pandemic has already reduced productivity due to the strategy adopted globally to contain it. This by default affects the purchasing power of consumers and the demand for electricity in general. The current situation in the Nigerian power sector is that a lot of capital investment is being made, most of which is dependent on donor funding, loans and budgetary allocation. For projects that we have already secured their funding, we do not expect any adverse effect.”
He, however, said his ministry was proactively seeking strategies to identify projects that would require counterpart funding in the face of dwindling national revenue so as to deliver within the projected timelines. “This explains our prayer for the distinguished senators to consider and approve additional funding for the execution of the various projects we are undertaking”. He added that the power sector was also grappling with the challenge of infrastructural misalignment, market inefficiency, transparency, sector governance, policy coordination, increased energy access and completion of legacy projects.
Blueprint commends the mediatory role of the leadership of the National Assembly, particularly the Senate president and House speaker, which has brokered truce and provided a reprieve in the thorny issue of electricity tariff. The truce is quite expedient as it will afford electricity consumers enough time to absorb the shock arising from the devastation of Covid-19 and the spontaneous hike in the Value Added Tax and the imposition of Stamp Duty on bank transactions amidst the galloping inflation and general traumatic high cost of living.
The consequences of multiple taxations on the ordinary Nigerian, whose sources of income had been on a lockdown since the index case of Covid-19 in Lagos, are quite enormous. While acknowledging the strain on government’s finances and the N380 billion earmarked for tariff subsidy this year, we believe it is appropriate to include electricity subsidy in the federal government’s N2.3 trillion economic stimulus plan. This is necessary as multiple taxation is an overkill of a system that is already comatose.