The federal government has approved the resumption of the collection of Service-Based electricity Tariffs (SBT) from next week, after sealing a deal with organised labour.
The government was forced to suspend the implementation of the new electricity tariff regime in September, following a threat of industrial unrest by the Nigeria Labour Congress (NLC), its affiliates and allies.<p class="has-drop-cap" value="<amp-fit-text layout="fixed-height" min-font-size="6" max-font-size="72" height="80">However, the federal government and organised labour have resolved that the tariffs for certain categories of power consumers should be reviewed downward.However, the federal government and organised labour have resolved that the tariffs for certain categories of power consumers should be reviewed downward.
While the tariffs for customers in A and B bands were reduced by 10 per cent, the tariff for C band customers was reduced by 30 per cent.
For customers in the D and E bands, their tariffs remain frozen, which implies that there is no increment.
The Special Adviser on Infrastructure to President Muhammadu Buhari, Mr Ahmad Zakari, who confirmed this yesterday during the 51st virtual Power Dialogue organised by Nigeria Electricity Hub in Abuja, noted that since labour has accepted the new terms, the implementation will begin next week.
Zakari said the electricity market in the country will collapse if the government allows it to continue the way it has always been run, adding that the intention of the government is to transit to a market-based regime, where the demand and supply will determine prices.
According to him, after negotiations with organised labour, all the parties agreed to a reduction of tariffs for certain bands while bands D and E remain frozen and C will continue to be subsidised in the short term to the tune of 30 per cent.
He added that there will henceforth be more transparency in the collection of electricity revenues by the Distribution Companies (Discos) since it is now being closely monitored by the government.
He added that Value Added Tax (VAT) and other deductions will now be removed from the funds before the rest will be remitted to the Discos.
“Remember that 55 per cent of on-grid consumers are still 100 per cent subsidised. The N31 on average per kilowatt per hours for band D and E were paying before SBT, they will continue to pay. Only 45 per cent of the on-grid population was affected. And with the agreement with labour, we are now going on to take out an additional 30 per cent from band C in terms of what they were supposed to pay.
“That increase will be reduced by 30 per cent and then there will be a 10 per cent reduction in A and B. But I promise you next week on the headlines if we resume service based tariff, what everyone will be saying is that government has increased tariff for everybody and that’s because there’s a vibrant urban population that consumes the headlines. But we are committed to doing the right thing.
“Hard decisions are not always popular. But we are going back to SBT with the reduction agreement that we have with labour and we are going to make this market work,” he stated.
On whether he should be quoted on the next week resumption of SBT, since it was made in the public, Zakari stated that labour and the government already announced the agreement, adding that the take-off would have been two weeks ago, but for the fact that the government wanted to deploy some palliatives.
“That government/ labour agreement was two weeks ago, but the government actually had refused to implement it because it wanted to provide additional palliatives at this difficult time. You can quote me that this was supposed to have taken off two weeks ago,” he said.
He admitted that the government had been doing many things wrong, which had prevented it from making progress, but noted that from now, all the hard decisions to ensure the survival of the industry and supply of stable electricity to Nigerians will be taken.
He explained: “If you have a product that sells for N10, there’s no business that can survive selling for N5. Your working capital I’ll expire and you will be out of business. That’s the situation we found ourselves and we have been focusing on the wrong things.
“We thought that magically that power should be N31, and then make all the Discos comply when power costs N50. We need to stop that. If the government wants prices to be low, it has to drive efficiency. The SIM card that was N50k, people now give it out for free.
“We cannot hold the Disco value chain down but what we can do is to find efficiencies in gas pricing and aggressive loss reduction through metering and long interest financing. What you will find is that over time, prices will come down.
“There’s no way we are going to continue to live in an imaginary world where we think that we can make progress selling a product for less, whereas it costs more.
“It’s unfortunate the government didn’t take action early and we are at a point right now where it’s no longer sustainable.”
He said the government could not have 60 per cent of subsidy going to the top 10 -20 per cent of the population when there are no medicines in hospitals and schools are struggling even as the country needs more security equipment.
According to him, “What we have done through the banking sector, all the Discos collections are being monitored and we will deduct VAT and taxes for the government and then the loans from the central bank and then pass down the balances to the Discos.
“There’s full transparency. If there’s N5bn in the account, we are going to take the market money and the debts and then give the Discos the balance. They will have a facility that enables them to wrap up slowly and the 63 per cent minimum remittance. There’s an Opex and Capex loan made available.”
In his remarks, Chief Compliance Officer, Kaduna Disco, Mr. Lawal Lawal, said metering constituted half of the problems in the industry, adding that if it is solved, other things will fall in place.
He said: “Metering is nothing short of 50 per cent of the problem. It doesn’t just give you more funds it also ensures that you have more data to work with to make informed decisions with.
“It’s unfortunate that a lot of focus has gone to other areas, but with the benefit of hindsight, if I was to look at the single biggest problem, I would focus on metering because if we are able to close the gap between the collection, the distributor and the transmitter will go all out to ensure that they get people to build more megawatts and get people to build more plants.
That’s the next logical thing.”
He said in the last five years, Discos have been doing enumeration, adding that the enumerated number has been going down because they have been finding more customers.
“It used to be somewhere around five million around 2015/2016 and then went to seven million and last year when MAP started, it was about nine million. But now, the data as at July which we submitted to government is somewhere around 11.2 million,” he stated.