Details have emerged as to why the N224 billion electricity
subsidy money provided by the federal government between 2008 and 2012 has
failed to significantly impact on the sector.
subsidy money provided by the federal government between 2008 and 2012 has
failed to significantly impact on the sector.
LEADERSHIP learnt that the major reason the subsidy system has
not worked to improve the market was due to the fact that the rules of the
electricity market are not being followed in carrying out the subsidy
disbursement.
not worked to improve the market was due to the fact that the rules of the
electricity market are not being followed in carrying out the subsidy
disbursement.
An informed source told LEADERSHIP that while government’s
intention was laudable, there is no solid framework to block the money from
leaking into private pockets.
intention was laudable, there is no solid framework to block the money from
leaking into private pockets.
The source said that rather than base the subsidy disbursement
on operators collection efficiency, political consideration was being used to
allocate the money.
on operators collection efficiency, political consideration was being used to
allocate the money.
He stressed that the electricity market could do better than it
was doing now if properly managed in such a way that expenditure was controlled
and leakages of funds into private pockets blocked.
was doing now if properly managed in such a way that expenditure was controlled
and leakages of funds into private pockets blocked.
“The market should not be bureaucratised and the use political
consideration to allocate subsidy is moral hazard because it will create a
negative incentive for those who are collecting revenue to also seek bailout,”
he said.
consideration to allocate subsidy is moral hazard because it will create a
negative incentive for those who are collecting revenue to also seek bailout,”
he said.
Despite federal government’s approval of N178 billion as
electricity subsidy in 2008, which was to last three years, and another N46
billion in 2012, there still exist about N200 billion worth of unpaid purchased
power bills owed to market participants, such as Agip which is owed N16 billion
for gas, while an estimated N106 billion is needed to close the existing
metering gap.
electricity subsidy in 2008, which was to last three years, and another N46
billion in 2012, there still exist about N200 billion worth of unpaid purchased
power bills owed to market participants, such as Agip which is owed N16 billion
for gas, while an estimated N106 billion is needed to close the existing
metering gap.
The electricity subsidy money is supposed to be used to pay for
costs of power, capacity expansion and maintenance of the distribution
networks, but despite the allocation, the distribution networks are still weak
and can hardly evacuate more than 5,000 megawatts of electricity.
costs of power, capacity expansion and maintenance of the distribution
networks, but despite the allocation, the distribution networks are still weak
and can hardly evacuate more than 5,000 megawatts of electricity.
The source explained that rather than manage the electricity
market as a ‘market’, it is being managed like an industry where everyone earns
the same salary even when certain distribution companies (Discos) are operating
at a loss, collecting low revenue and owing hugely for gas.
market as a ‘market’, it is being managed like an industry where everyone earns
the same salary even when certain distribution companies (Discos) are operating
at a loss, collecting low revenue and owing hugely for gas.
He noted that policing the financial aspect of the market was
critical to enabling government know if the operators were using the revenue
adequately to finance their obligations in the market.
critical to enabling government know if the operators were using the revenue
adequately to finance their obligations in the market.
The source said: “Although I have no facts that the money has
been stolen, but the money is supposed to be released based on performance –
which is not the case. It is wrong for a Disco which claims to have collected
zero revenue, which even owes for gas, to receive full subsidy. There is a deep
misalignment here.
been stolen, but the money is supposed to be released based on performance –
which is not the case. It is wrong for a Disco which claims to have collected
zero revenue, which even owes for gas, to receive full subsidy. There is a deep
misalignment here.
“Some claim they are not selling any power, not collecting money
and collecting subsidy money while other Discos are struggling to collect the
revenue. We need to create more discipline in the market and put more spotlight
on the expenditure of the Discos. There needs to be a proper accounting
framework.
and collecting subsidy money while other Discos are struggling to collect the
revenue. We need to create more discipline in the market and put more spotlight
on the expenditure of the Discos. There needs to be a proper accounting
framework.
“If we can have a hold on how much goes in and comes out, we
would be able know exactly where the fault is; because knowing Nigeria, it’s
fair to assume that some of the money is going into places where they should
not go and some people are under-reporting their performance. If money
received is being diverted, there will be no power reliability no matter how
much generation we have.”
would be able know exactly where the fault is; because knowing Nigeria, it’s
fair to assume that some of the money is going into places where they should
not go and some people are under-reporting their performance. If money
received is being diverted, there will be no power reliability no matter how
much generation we have.”
He said there was little incentive to improve collection because
whether a Disco collects revenue or not, it collects subsidy to pay salary, and
warned that if the indebtedness is not controlled, it will keep increasing and
it will eventually be taken over by Nigerian Electricity Liability Management
Company (NELMCO) when the new owners come.
whether a Disco collects revenue or not, it collects subsidy to pay salary, and
warned that if the indebtedness is not controlled, it will keep increasing and
it will eventually be taken over by Nigerian Electricity Liability Management
Company (NELMCO) when the new owners come.
The proceeds from consumer, he said, can take care of most of
the cost of supplying electricity “if we control the expenditure in the market
and improve the receivables by closing out every way that those funds can be
diverted into private pockets.”
the cost of supplying electricity “if we control the expenditure in the market
and improve the receivables by closing out every way that those funds can be
diverted into private pockets.”
The metering gap, he noted, has prevented government from
knowing exactly what the Discos are collecting, insisting that “we need to know
what the collections are and whether the revenue is used to run the market in
line with the requirement.”
knowing exactly what the Discos are collecting, insisting that “we need to know
what the collections are and whether the revenue is used to run the market in
line with the requirement.”
The subsidy money is paid by the market operator, while the
Nigeria Electricity Regulatory Commission (NERC) and the Ministry of Power have
reserved rights to audit the market operator for any act of irregularities.
Nigeria Electricity Regulatory Commission (NERC) and the Ministry of Power have
reserved rights to audit the market operator for any act of irregularities.
Source:
Leadership
Leadership
