Nigerian govt to offer free electricity for 3 months

The Federal Government of Nigeria would have to pay electricity suppliers an estimated ₦120billion to provide Nigerians free electricity for two months, media reports confirm.

According to data from the Nigerian Electricity Regulatory Commission, (NERC), during the third quarter of 2019, a total invoice of ₦179.66billion was issued to the eleven (11) DisCos for energy received from the Nigerian Bulk Electricity Trading Company (NBET)  and for service charge by the Market Operator.

When this is divided for three months, it comes to an estimated N60 billion a month and N120 billion for two months.

Sunday Oduntan, executive secretary of Association of Electricity Distribution Companies (ANED) told BusinessDay by phone that the free electricity for two months is solely the initiative of the Federal Government.

“It is not free from DisCos as there is a value chain. What we issued is a statement of support for the Federal Government’s plan,” said Oduntan.

However, DisCos have been unable to fully settle this market invoice. According to the report, only a sum of ₦58.81billion out of the total invoice was settled. This amount represents 32.73% remittance performance from July to August 2019.

Following this pattern of remittance, the Federal Government could also choose to settle about a third of the market invoice for the two months it wants to give Nigerians free electricity, but this will further worsen shortfall in the power sector.

The electricity market already has shortfalls estimated at over N2.4 trillion, which consist of market shortfall of ₦1.335 trillion caused by DisCos inability to collect adequately and fully remit their collections and tariff shortfall of ₦1.109 trillion caused by the regulator’s decision not to allow cost-reflective tariffs,

It is doubtful the Federal Government has the capacity to pay for the measure in view of declining crude oil revenue caused by the outbreak of the coronavirus pandemic.