PwC Report: FG Spent N2.3tn on Oil, Electricity Subsidies in Four Years
The federal government
expended a total of N2.3 trillion on subsidising the consumption of petrol and
electricity from 2015 to 2018, a report from global accounting and consulting
firm, PricewaterhouseCoppers (PwC), has revealed.
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Chineme Okafor in Abuja. |
The report, which was
obtained by THISDAY yesterday, was presented to power sector stakeholders at a
roundtable organised by Mainstream Energy Solutions- operators of the Kainji
and Jebba hydro power generation companies (Gencos), by the Chief Economist of
PwC Nigeria, Dr. Andrew Nevin.
The report highlighted
the challenges of Nigeria’s electricity sector and potential solutions to them.
It equally indicated that the country spent N1.12 trillion as electricity
subsidy and another N1.2 trillion on petrol.
It noted that both
subsidy expenditures within the review period represented 17 per cent of
Nigeria’s current foreign reserves and 26 per cent of 2019 federal budget.
It said: “The federal
government has expended about N1.2 trillion as petroleum subsidy over the past
four years (2015-2018). The tariff shortfall in the electricity sector which
technically is the electricity subsidy payable by the federal government stood
at N1.12 trillion between 2015 and 2018.
“Both subsidies amount to
N2.3 trillion, which represents about 17 per cent of current foreign reserves
and 26 per cent of the 2019 budget.”
The PwC report stated
that the total electricity subsidy for the four years could cover the current
budget of the ministries of health and education.
It added that electricity
distribution companies (Discos) have steadily reported losses since they took
over the distribution assets from the government at the conclusion of the power
sector privatisation in 2013.
“In addition, there has
been a steady growth in the amount of loss reported. In 2017, the total loss
reported by Discos stood at N417 billion.
“Liquidity crunch is the
biggest challenge of the Nigerian electricity sector today. The 11 Discos have
been struggling to meet their obligations to the Nigerian Bulk Electricity
Trading Plc (NBET) and Market Operators (MO) as evidenced in their low
remittances to NBET and MO,” the report stated.
According to it, in the
first quarter (Q1) of 2019, only about 28 per cent of the N190 billion invoice
comprising invoice of N161.4 billion for energy purchased from the NBET and an
invoice of N28.8 billion for administrative services from MO, were remitted by
the Discos.
“In one year (Q1’2018 –
Q1’2019), Discos’ outstanding remittance to NBET and MO stood at about N523.8
billion and N80.3 billion respectively.
“Consequently, NBET have
in turn been unable to meet their obligation to the generation companies
(Gencos) thus creating a liquidity challenge that has plagued the electricity
industry since the privatisation exercise in 2013,” it added.
The report noted that the
proportion of remittances relative to market invoice were low across all the
Discos, indicating that none of the Discos could attain 50 per cent of the
total bill they owed for electricity supplied to them.
“This situation creates
liquidity challenges to the generation and transmission segment of the
industry,” it said, adding that it is believed that metering customers will
reduce the liquidity challenges of the country.
“But meter delivery
progress has been slow so far. Abuja, Benin and Port-Harcourt are the Discos
that currently have more than half of their customers metered. Yola Disco
recorded the slowest metering progress (21 per cent) of all Discos as at Q1’
2019.
“Progress in metering customers will help to reduce ATC&C (Aggregate Technical Commercial and Collection) losses and billing collection inefficiencies in the sector,” it said.
“Progress in metering customers will help to reduce ATC&C (Aggregate Technical Commercial and Collection) losses and billing collection inefficiencies in the sector,” it said.
Indicating that the
tariff shortfall in 2018 by the 11 Discos amounted to N384 billion, the PwC
report also stated that the average aggregate technical, commercial and
collection loss in 2018 was 52.7 per cent.
This, the report pointed out, meant that more than half of the
energy received by Discos was wasted.
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