Organised Private Sector Backs FG on Electricity Subsidy Removal

The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture’s (NACCIMA), Manufacturers Association of Nigeria (MAN), Nigeria Employers’ Consultative Association (NECA), Nigerian Association of Small and Medium Scale Enterprises (NASME), and Nigerian Association of Small Scale Industrialists (NASSI), under the aegis of Organised Private Sector of Nigeria (OPSN), have backed the removal of subsidy on electricity.

OPSN, however, asked the federal government to implement measures to ameliorate the impact of the recent increase in electricity tariffs in order to reduce its burden on industrial consumers and prevent the retrenchment of workers.
A statement issued by NACCIMA’s Research, Statistics and Development Unit, on behalf of OPSN, said the members met with the presidency on September 4, through the Special Adviser on Infrastructure to President Muhammadu Buhari, and resolved to back the removal of subsidy.

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OPSN said the meeting attended by NACCIMA, MAN, NECA, NASME and NASSI, was held for the government to justify “the necessity for this tariff increase at a time when the economy is facing a potentially deep recession and Nigerians are facing increasing hardships, with unemployment rising to over 27 per cent as many factories are facing total closure.”

The statement said the special adviser informed them that “over the past five years, subsidy on electricity has skyrocketed from N165 billion in 2015 to over N500 billion in 2019, superseding the federal government’s budgetary allocations to health and education combined. These figures were also confirmed from the recent Senate Committee on Power’s Investigative hearing in June 2020.”

OPSN said it agreed with the government that the subsidy situation is unsustainable, adding that “if allowed to continue, the electricity industry will collapse as the government no longer has the fiscal capacity to sustain the increasing subsidy level and at the same time finance the capital investment necessary to extend electricity supply to the over 90 million Nigerians who lack access to electricity.”

“After extensive, frank and open discussions, the meeting agreed as follows:
“The subsidy situation is simply unsustainable. And if allowed to continue, the electricity industry will collapse as the government no longer has the fiscal capacity to sustain the increasing subsidy level and at the same time finance the capital investment necessary to extend electricity supply to the over 90 million Nigerians who lack access to electricity.
“It is, therefore, necessary to create conditions that will attract private investment in the industry for which cost-reflective tariff is inevitable.

“It is however imperative that the confidence of electricity consumers must be inspired and they must be assured that the new tariff regime will lead to significant and sustained improvement in the quantity and quality of electricity supply.
“The new tariff structure must be transparent, charges must be fair and consumers must be able to verify that they are paying only for what they consume.

“Government must compel distribution companies(DISCOS) to massively invest in a metering program that will totally eliminate estimated billing which they (DISCOS) routinely resort to, to extort money from consumers to boost their revenue and make up for their chronic inefficiencies. The metering programme through the central bank, to fund locally made meter manufacturing bulk purchase should be accelerated.

“Measures that should ease the burden of industrial consumers must be implemented even if as temporary arrangements. This is to enable them to sustain operations and remain competitive without resorting to laying off employees. Such measures as the Eligible Customer Scheme, which has been approved by NERC, but has been blocked by distribution companies must be allowed to come into play without any further delay,” the statement explained.

OPSN specifically requested from the government the implementation of the Eligible Customer Scheme (ECS), which has been approved by Nigeria Electricity Regulation Commission (NERC) but has been blocked by Distribution Companies (DISCOs) and the review of the border closure that has remained closed since August 2019.

OPSN urged the federal government to prevail on the Central Bank of Nigeria (CBN) to review its recent decision that banned banks from approving Form M that is routed through the third party for payments of imports.
It also requested the government to help to “resolve the current dispute between the Manufacturers Association of Nigeria (MAN) and the DISCOs, which has resulted in never-ending litigation holding back the utilisation of over 5000MW of stranded electricity that is not deliverable to consumers.

“Government must prevail on NERC to be more firm and fair in dealing with stakeholders in the electricity supply market,” OPSN said.
It stated that it would continue to engage the government through the presidency, the Ministry of Power, NERC and other key agencies to continue deliberations and provide feedback on the monitoring of the implementation of the Service-Based Tariff structure.

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