The Federal Government has traced the problem in the power sector to the sales of power generation and distribution companies to incompetent investors by the previous administration of President Goodluck Jonathan.
This disclosure was made by the Minister for Information and Culture, Alhaji Lai Mohammed, while responding to questions on electricity tariff adjustment, at a meeting with Online Publishers Association of Nigeria, on Saturday, September 26, 2020.
According to News Agency of Nigeria (NAN), Mohammed said that the federal government had spent N1.7 trillion to subsidize electricity tariff after the previous administration sold and handed over to the investors, an expenditure he said is no longer sustainable especially under the prevailing economic conditions.
He pointed out that the country’s revenue and foreign exchange earnings had dropped sharply by almost 60% due to the downturn in the fortunes of the oil sector.
Mohammed said, “Before we came in, the power sector had been privatized by the previous administration, but the people they sold to them are incompetent. When we assumed power, we met the mess. Apart from the fact that the Distribution Companies (Discos), could not meter the people, they also could not pay for the electricity generated by the Generation Companies (Gencos), from the Nigerian Bulk Electricity Trading Companies.’’
“We had two options – cancel the entire sales or to get the Discos to recapitalize. We took over the debt of the Discos, which was about N701 billion, because of the effect the cancellation of the sale will have on the country and international investors. The people are simply incompetent and if we did not provide the money that means they will not distribute power to anybody,” he said.
The minister revealed that the government did not have the resources to continue along the path of subsidizing electricity tariff to private companies.
He said, “To borrow just to subsidize generation and distribution, which are both privatized, will be grossly irresponsible.’’
Going further, Mohammed disclosed that the Federal Government was providing incentives to local manufacturers of meters through the Central Bank of Nigeria, to cushion the effects of adjustment of the tariff.
He said that companies importing meters would get incentives through tax waivers.
Mohammed reiterated that in order to protect the large majority of Nigerians who could not afford to pay cost-reflective tariffs, only customers with a guaranteed minimum of 12 hours of electricity would have their tariffs adjusted as the industry regulator, Nigerian Electricity Regulatory Commission (NERC), would ensure its implementation.
The minister said that the government was also taking steps to connect Nigerians not yet connected to electricity at all, to the facility as the government is providing solar power to 5 million Nigerian households in the next 12 months under its Economic Sustainability Plan.