Federal Government has set aside a total of N327 billion in the 2022 Budget to offset the electricity tariff shortfall incurred by the Ministries Departments and Agencies (MDAs) who are not paying electricity bills.
While N27 billion goes to the MDAs, N300 billion would be used to settle other tariff indebtedness which the distribution companies (DisCos) incurred because of their inefficiency.
Speaking at a 2022 Budget Breakdown, organised by the Ministry of Finance Budget and National Planning, at the weekend, in Abuja, the Director General of Budget Office, Mr Ben Akabueze, said that the government is a shareholder in the DisCos but the government has not started collecting dividends from them.
“The government is a shareholder in the companies. But as a shareholder, you don’t collect part of the revenues the company collects. We share in the profit of the company when the company makes a profit and declares a dividend. So, the billings of DisCos are not part of government revenues.
“On the contrary, because the electricity tariff that we all pay does not cover the cost of producing the power, there is a shortfall the government has to incur on behalf of the citizens. In 2022, the tariff shortfall is projected at N300 billion and we provided for it. This is the money that we have to pay.
We provided another N27 billion for the MDAs electricity use. And that is government trying to lead by example. Many MDAs are defaulting in paying electricity bills” Akabueze, declared.
However, going forward, the government has put a mechanism in place to make it difficult for MDAs to incur electricity bills and not pay for it.
“While we are trying to resolve the historical situation, going forward we are going to tighten up and provide a mechanism where MDAs can’t incur utility or electricity debts and leave them behind. So, instead of us receiving from the DisCos from this budget, there is a provision in this budget to pay money to the DisCos.
‘The DisCos are at the collecting end. When they (consumers) pay them, they have to pay the generation companies (GenCos) who generate power. Then, the GenCos will have to pay the gas companies that supply them the gas which they use to generate power. What has happened now, however, is that the system has been tightened. There is what is called the waterfall payment mechanism designed by the Central Bank of Nigeria (CBN). So, every electricity bill can only be paid into a bank account and that is any money that goes there is a waterfall arrangement that determines how that money is shared by every part of the chain. How much of it goes to the GenCos, how much goes to the gas suppliers. This is something under the purview of the Central Bank of Nigeria.
“Nigerian Electricity Regulatory Commission (NERC) is empowered to protect the consumers and I am aware that they take action.
On the distribution of meters, the DG acknowledged that it is increasing adding that the Power Sector Recovery Plan (PSRP) has been mandated to deploy over 6 million meters before the end of 2025.
“I think, all across the country you will notice that the metering is improving. The problem of metering is not just about distribution but the skilled manpower to install and deploy these meters. There is a government and Central Bank of Nigeria-supported programme to procure and deploy about 6 million meters and that is being tracked.
“This committee that is under the Vice President and the Finance Minister which called the Power Sector Recovery Plan (PSRP) has the goal to get that sector back to viability by 2025” he said.
In her remarks, the Miniser of Finance Budget and National Planning, Mrs Zainab Ahmed, acknowledged that the privatisation of the power sector has been problematic but the DisCos have brazed up to the challenge and they have made a lot of efforts to improve their performance.
“The DisCos have not started paying taxes or royalty dividends. This is not what was expected in the privatisation. The privatisation itself has been problematic. But of recent there is a lot of efforts that have been put together by the distribution companies to improve the performance of the sector” she submitted.