FG borrowed N1.3tn to subsidise power, says W’Bank report

A new report of the World Bank has revealed that the Federal Government has borrowed a total of N1.3tn since 2017 to ensure that generation companies and gas suppliers get enough payments to sustain electricity supply.

The bank stated this in its ‘Resilience through Reforms’ report, which also indicated that the nation’s power sector would require additional N3.08tn through 2023 to sustain the current performance levels and tariffs.
The report said, “To ensure that Gencos and gas suppliers receive enough payments to continue generating electricity, since 2017 the FGN has borrowed a total of N1.3tn ($4.2bn).

“In 2019 total FGN support reached N524bn ($1.7bn), 0.4 per cent of GDP – higher than the N428bn budget for health and just 20 per cent less than the N650bn budgeted for education.”
The World Bank noted that although all the six generation companies, and eleven distribution companies had been privatised, the Federal Government through the Nigerian Bulk Electricity Trading Company had continued to buy electricity from the Gencos and independent power producers before reselling to the Discos.
The FG’s agency, Nigeria Electricity Regulatory Commission, regulates tariff in the sector.
The bank stated that the Transmission Company of Nigeria was still strictly government-owned.
Nigerians pay less than the cost of production for electricity, according to the report, resulting in revenue shortfall.
The FG paid N1.68tn as cumulative tariff shortfall between 2015 and 2019, it said.
Due to foreign exchange depreciation and rising domestic inflation, tariff shortfalls had also been on the rise, the bank added.
The report stated, “Every Nigerian who receives electricity from a Disco pays less for electricity than the cost of supplying it.
“However, 80 per cent of the spending on tariff shortfalls benefits the richest 40 per cent of the population; only eight per cent benefits the bottom 40 per cent, and of this, less than two per cent benefits the poorest 20 per cent.
“Significant resources spent on funding tariff shortfalls disproportionately benefit the relatively wealthy who have access to the grid and use more electricity so that ultimately, a big chunk of government support goes to those who do not really need help with paying bills.”
The report showed that 43 per cent of the population, which is about 85 million people, lacked access to grid electricity, making Nigeria the nation with the world’s largest energy access deficit.