Subsidy removal: Easing burden on electricity consumers through CBN intervention

Stakeholders continue to insist that the interventions by the Central Bank of Nigeria (CBN) remain a major avenue to ease burden on consumers as the federal government plan to stop fuel subsidy; ADEOLA TUKURU writes .

The federal government last week said  Allowable Tariff (AT) in the country has a gap of  N28 per unit as against what is currently paid under the Service Based Tariff.

The gap in electricity supplied to consumers therefore stands at about N1.0 trillion between 2019 and 2021.

Just recently, Special Adviser to President Muhammadu Buhari on Infrastructure, Ahmad Zakari had disclosed at the 12th edition of PwC Nigeria’s Annual Power and Utilities Roundtable, that Nigeria needs to optimise the potentials in the power sector through a cost-reflective tariff regime.

The CBN had introduced a number of interventions in the sector to keep it afloat despite liquidity crisis. Power and Aviation Intervention Fund (PAIF), hovering at about N300 billion, Nigerian Electricity Market Stabilisation Facility (NEMSF) at about N213 billion, N140 billion Solar Connection Intervention Facility, over N600 billion tariff shortfall intervention as well as a recent N120 billion intervention designed for mass metering among others are part of the interventions. 

The country’s monetary and fiscal authorities CBN had to initiate interventions to douse tension and avert a collapse of the 2013 electricity privatisation exercise.

In about eight years, CBN would have spent over N1.5 trillion to keep the nation’s power sector afloat although the sector was privatised with the intention of it surviving by itself.

Although most stakeholders insisted that the interventions remained critical, especially to ease the liquidity crisis and attracting further interventions, they maintained that tweaking the interventions in such manner would ease further burden on the masses and also halt arbitrary billing of consumers.

The former President and Chairman of Council of Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola said the strongest argument in favour of subsidy is the need for the government to protect the welfare of the people by underwriting some of their basic household and infrastructure needs. 

He noted however that the argument about removal of electricity subsidy, if any, is not the most fundamental to Nigeria at the moment. “Rather, the inability to supply the electricity need of Nigerians, in the right quality and quantities. If supply deficit could be remedied, the cost of electricity and energy generally would be cheaper to Nigerian households firms and even government compared with the cost of alternative sources of power to them,” he noted.

According to him, the CBN initiatives may help the sector resolve the liquidity requirements to some extent but the end must be allowed to justify the means of assurance of supply of electricity requirements in exchange for such support by the CBN.

An expert, Prof Wunmi Iledare noted that interventions by the CBN as a payable loan is understandable even if it is a forgivable loan.

He insisted that the current structure of the Nigerians electricity market  could mar the interventions, stressing there must be a decentralized energy planning system.  

According to him, while it is good that banks are targeting spending, subsidy may be a political expediency instrument not economic efficiency. 

“It should be disavowed. By the way, estimated billing now termed electronic billing is fraudulent! 

A quick way to bring subsidy to an end is metering and decentralisation of power management and services   Nearly everything centralised in the fashion of militarism has failed woefully,  education, health,  energy services  road infrastructure, name it,” Iledare said. 

An energy expert, Eseosa Lloyd Onaghinon, stated that the energy sector must be rid of  inefficiencies, which is usually passed on to consumers, adding that there is about 40 per cent inefficient loses between transmission and distribution.

“If we do not address such losses that occur, we might as well get into a trap where it’s an unending discussion of “subsidy” though it is actually continuous inefficiencies covered up as subsidies,” Onaghinon stated. 

Energy lawyer, Osagie Agbonlahor, noted that the attitude of Nigerians would make it difficult for electricity sector to make profit, adding that the development could be part of  the failure of electricity operators and revenue collectors.

“How many army, police, air force, navy barracks that the residents pay electricity rates at all? How many government ministries, army, air force, navy offices pay for  electricity consumption. Who has ever had the courage to drive to the barracks to remove wires as they would to ordinary Nigerians. For how long have this been going on in this country. Take away this huge leakages and you will see that the ordinary Nigerians have actually been sustaining and subsidizing the consumption of these fat cows.”

Agbonlahor said the government initiated the idea of deducting the huge outstanding bill on electricity consumed by the barracks and government offices during the time of the former president Obasanjo era.