Beyond the importance of energy subsidisation, the back and forth between the government over the disputed cost of accumulated electricity subsidies in the last thirteen years only underscores the deeper issue affecting the attainment of energy security in the country.
On Tuesday, President Bola Tinubu approved the payment of N2.8tn to power generation companies (Gencos) as the Federal Government’s confirmed and verified liability for the total sum of electricity subsidies dating back to 2010. The Gencos had presented N6trillion in liabilities owed to them by the federal government. The federal government, however, stated that the N6 trillion claim by the operators was an inflated figure and does not accurately reflect the actual electricity subsidies accumulated during the period under review.
The Federal Government also disclosed that it arrived at the approved N2.8 trillion payout to the Gencos after their claim of the government’s humongous financial obligation to them was audited. The payment is expected to provide electricity operators with a much-needed cash inflow and financial stability to revamp and ramp up their operations and enhance service delivery to the people. But, like with many actions, decisions and policies of this government which involve core areas of national priorities, the announcement of the electricity subsidies backlog payment to the operators, which has been commended in some quarters, has been dogged by controversy. No sooner had the government announced the approval of payment than electricity generation companies rejected the N2.8 trillion debt audit.
When the privatisation of the power sector was completed in 2013 which resulted in the unbundling of the hitherto state-owned enterprise into six Generation Companies (GenCos) and eleven Distribution Companies (DisCos) to increase efficiency, while retaining government control over transmission, the belief and consensus at the time was that the move will totally boost the nation’s power and enhance energy security as it will replace the lethargy, inefficiency, corruption, operational rigidity and inertia that plagues the sector when the government was in charge with brutal efficiency, transparency, expertise, technical know-how, operational flexibility and contemporary best practices in the sector that will accompany the takeover of the sector by investors and private companies which would in turn enhance power generation generation and energy security in the country, putting years of unreliable and epileptic power supply which hampered productivity and industrialisation effort to bed.
But as it turns out, the privatisation of the sector did not bring the kind of far-reaching change the country and the people need and expect. It was pretty much the same old story. Save for the introduction of prepaid meters and the ridiculous segmentation of electricity consumers into bands which is just another way to exploit and shortchange Nigerians, one cannot say the sector has undergone any wholesale and significant improvement since the privatisation was completed some thirteen years ago, this is not unconnected to the lack of transparency and openness that characterised the process of privatisation. The process was dogged by cronyism and patronage with friends and associates of those in power, who clearly did not have the required expertise and financial muscle needed to carry out the much-needed revitalisation, grabbing the huge pie of the sale.
Another reason that has been adduced for the lack of any consequential, material and tangible growth in the sector is the heavy involvement in certain operations and the subsidisation of electricity for Nigerians by the government. Those who believe that for Nigeria to generate and distribute enough electricity to meet its residential, commercial and industrial needs the government must do away completely with electricity subsidies have argued that Nigerians must pay cost-reflective tariffs. But this argument amounts to an oversimplification of the matter. Nigeria is still a developing nation and to put the pressure and burden of power generation and distribution on a largely impoverished citizen and struggling industrial base will only put a strain on the economy if it does not completely tank. The people need all the electricity subsidies they can get to maintain household consumption and keep inflation down. The manufacturing sector also needs power to be subsidised to boost production and grow the nation’s gross domestic product.
Beyond the importance of energy subsidisation, the back and forth between the government over the disputed cost of accumulated electricity subsidies in the last thirteen years only underscores the deeper issue affecting the attainment of energy security in the country. The government feels the electricity generation companies and the distribution companies are not doing enough to justify their licences while these companies also believe that the government is the one standing in the way of massive investment and comprehensive development that will drive economic growth.
Now that the Association of Power Generation Companies, APGC, has explicitly rejected the President Bola Tinubu reported reduction of the Federal Government’s power sector legacy debt owed to GenCos) from N6.5 trillion to N2.8 trillion, it remains to be seen what the outcome of the standoff will be. Be that as it may, one cannot entirely fault the association’s rejection of the figure announced by the president as the amount due for the payment of accumulated electricity subsidies. To remove doubts and ensure transparency, the government must provide details of the audit and how it arrived at N2.8 trillion instead of the N6.5 trillion quoted by the companies.
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