OpeOluwani Akintayo
Lagos — The federal government and organised Labour have ascented to resumption of the reviewed Service-Based electricity Tariffs from next week.
The Special Adviser on Infrastructure to President Muhammadu Buhari, Mr Ahmad Zakari confirmed this in a statement in Abuja.
According to him, both parties had agreed that while electricity tariffs for certain categories should be reviewed downward, tariffs for customers in A and B bands were to be reduced by 10 percent, and tariff for C band customers will be slashed by 30 percent.
Tariffs remain frozen for customers in the D and E bands.
The government suspend implementation of the new electricity tariff regime in September, following a threat of industrial unrest by the Nigeria Labour Congress, NLC.
Following the disagreement, both parties had agreed to suspension of the new tariffs which had caused the uproar for three months, and for commencement of collection of reduced tariffs.
Zakari explained that government intends to
transit to a market-based regime, where the demand and supply will determine prices as it could no longer allow electricity market to run the way it used to.
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 explained 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 said.
Zakari stated 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.”
