The Federal Government may withdraw the subsidy to reduce the cost of electricity for consumers if it continues to incur debts, a former chairman of the Nigerian Electricity Regulatory Commission (NERC), Sam Amadi, has said.
Amadi stated this when he appeared as a guest on Channels Television’s Sunrise on Saturday.
“Yes, the Federal Government would likely do that [remove subsidy on electricity]. See, the Federal Government can become envious,” he said.
“I mean, if some states are bragging that, ‘Oh, our tariff is low, we are doing better’. Well, the Federal Government, as a fiscal authority, can say, ‘You know what? Why should we be the ones looking bad owing?” Amadi added.
He, however, said that it would not be a wise thing for the government to do now, as developed countries also make use of subsidised energy consumption for their citizens.
Amadi explained, “There’s a big, emotive debate; most economists just take the ideological view that subsidy is bad. That’s not true. You see, subsidy is always a part of a market. The question is: how do you provide a subsidy and where do you put it, and for what purpose?
“Look at Europe, look at the EU, look at all these countries. They are actually having strong subsidies for energy arising from the crisis in Russia or Ukraine, arising from the need to make a transition from energy source to another.
“Subsidy is always there. If you look at Canada, Ontario, when they were moving to renewable, there was so much subsidy to make sure the price was affordable. So the wrong economics that says a subsidy is bad is not true.
“But the question then is: the Federal Government can say, ‘This is the amount of subsidy we can put, and this is how we can put it.”
He also raised concerns about the nation’s regulatory tools and corrupt practices.
“Again, we have not used our regulatory tools. If you look at the Electricity Act, it talks about the Power Consumer Assistance Fund. Now, that fund requires big desktop work, establishing who needs it,” he said.
Amadi added, “You have to have good data. DisCos do subsidies. What they do is they can do energy efficiency, give some discount on energy. That’s the subsidy. So, subsidies should be there. The question always is: we mask corruption in the name of subsidy when we balloon the number.
“And again, we put the monetary consequences as subsidy. For example, if we devalue your currency and then your debt used to be 100 billion, you moved to 700 billion. You now say you are paying a subsidy for 700 billion. That’s not true.”
₦1,949bn Subsidy Tariff Shortfall
The total gross electricity subsidy tariff shortfall incurred by the Federal Government in the power sector in 2024 amounted to ₦1,949 billion, according to data sourced from the Nigerian Electricity Regulatory Commission’s newly released 2024 Annual Report.
According to the data, the debt was incurred as a result of a lower-than-cost-reflective tariff as computed for the year under review.
President Bola Tinubu had on Friday appealed to power generation companies (GenCos) to give the Federal Government more time to complete the verification and validation of longstanding debts owed to them.
During a meeting with members of the Association of Power Generation Companies, led by Col. Sani Bello (retd), at the Presidential Villa in Abuja, the President assured them of his administration’s commitment to resolving the liquidity challenges in the power sector.
Tinubu acknowledged the historic liabilities inherited from previous administrations and pledged transparency and fairness in addressing them.
“I accept the assets and liabilities of my predecessors, and there is no question about that. But that acceptance must be on credible grounds. I need to wear the audit cap of verifiability, authenticity, and the fact that this inheritance is not a mere deodorant but a support structure for critical economic and industrial promotion,” Tinubu said, according to a statement by presidential spokesman Bayo Onanuga.
