- Minister says gas pricing in dollars is the major issue affecting Nigeria’s power sector.
- FG to pay about N1.6 trillion to subsidise electricity in 2024.
The minister of power, Adebayo Adelabu, advocates for gas pricing in naira to manage inflation in the sector due to foreign currency pricing. Speaking at the just-concluded three-day ministerial retreat in Abuja, Adelabu said the gas pricing in US dollars by the electricity generating companies (GenCos) affects electricity pricing to end-users caused by foreign exchange volatility. The development comes barely a week after GenCos warned that they may not be able to sustain current electricity supply levels following the payment of only 28.3 per cent of an invoice for power supplied to the national grid by the Nigerian Bulk Electricity Trading Plc in the September payment cycle.
He said, “A hugely volatile variable that significantly affects end-user electricity pricing. A preferable option is to ensure that the gas utilised by the GenCos is traded in naira to manage better the foreign currency-related inflationary trends that challenge the faithful application of the Multi-Year Tariff Order (MYTO) methodology. The good news is that over 98 per cent of the feedstock powering electricity generation in the country are transition or clean fuels as Nigeria ramps up its capacity to generate more electricity through renewable means such as solar, hydro, wind, bioenergy and others.”
According to the minister, the ministry would like to see more utility-scale solar power plants by 2030, which brings added responsibility for investments in generation and grid stability to address the variability that transmission of renewable energy-generated power over long distances brings. Also presenting at the retreat, the chairman of the Nigerian Electricity Distribution Company, Sanusi Garba, said the federal government will pay as much as N1.6 trillion to subsidise electricity in 2024 unless it reviews the current tariffs to align with current economic realities. He stated that from January to April 2023, the federal government paid N57 billion to subsidise the revenue shortfalls of the distribution companies (DisCos).
Sanusi said that without the tariff reviews that commenced in 2019, subsidies payable by the government would have grown to about a trillion naira per annum by 2023. “From 2015, the federal government paid almost N2 trillion in subsidies because of the huge gap between what revenue should have been and what it has been. In the current year, the estimated requirements for subsidy is in the region of N600 billion, and the projection for next year, if nothing is done, is about N1.6 trillion,” he added.