‘Nigerian govt may withdraw electricity subsidy if …’

A former chairman of the Nigerian Electricity Regulatory Commission (NERC), Sam Amadi, has warned that the Federal Government might discontinue its electricity subsidy programme if rising debts in the power sector persist.

Amadi issued the warning on Saturday during an appearance on Channels Television’s Sunrise programme.

“Yes, the Federal Government would likely do that [remove subsidy on electricity]. See, the Federal Government can become envious,” he said.

“I mean, if some states are bragging that, ‘Oh, our tariff is low, we are doing better’. Well, the Federal Government, as a fiscal authority, can say, ‘You know what? Why should we be the ones looking bad owing?” Amadi added.

Despite acknowledging the possibility of a subsidy removal, Amadi argued that eliminating it now would be ill-timed, especially as advanced economies continue to support energy consumption through subsidies.

“There’s a big, emotive debate; most economists just take the ideological view that subsidy is bad. That’s not true. You see, subsidy is always a part of a market. The question is: how do you provide a subsidy and where do you put it, and for what purpose?

“Look at Europe, look at the EU, look at all these countries. They are actually having strong subsidies for energy arising from the crisis in Russia or Ukraine, arising from the need to make a transition from energy source to another.

“Subsidy is always there. If you look at Canada, Ontario, when they were moving to renewable, there was so much subsidy to make sure the price was affordable. So the wrong economics that says a subsidy is bad is not true.

“But the question then is: the Federal Government can say, ‘This is the amount of subsidy we can put, and this is how we can put it.’”

He also criticised the inefficiency of regulatory mechanisms and raised concerns over the misuse of funds under the guise of subsidy.

“Again, we have not used our regulatory tools. If you look at the Electricity Act, it talks about the Power Consumer Assistance Fund. Now, that fund requires big desktop work, establishing who needs it,” he said.

Amadi added, “You have to have good data. DisCos do subsidies. What they do is they can do energy efficiency, give some discount on energy. That’s the subsidy. So, subsidies should be there. The question always is: we mask corruption in the name of subsidy when we balloon the number.

“And again, we put the monetary consequences as subsidy. For example, if we devalue your currency and then your debt used to be 100 billion, you moved to 700 billion. You now say you are paying a subsidy for 700 billion. That’s not true.”

New figures from the NERC’s 2024 Annual Report reveal that the Federal Government incurred a subsidy tariff shortfall totalling ₦1.949 trillion last year. The shortfall stemmed from electricity tariffs being set below cost-reflective levels.

Meanwhile, President Bola Tinubu has appealed to power generation companies for more time to reconcile outstanding debts. Speaking during a meeting at the Presidential Villa in Abuja with members of the Association of Power Generation Companies, led by retired Colonel Sani Bello, Tinubu reiterated his government’s commitment to solving the sector’s liquidity crisis.

“I accept the assets and liabilities of my predecessors, and there is no question about that. But that acceptance must be on credible grounds. I need to wear the audit cap of verifiability, authenticity, and the fact that this inheritance is not a mere deodorant but a support structure for critical economic and industrial promotion,” the President stated, according to his spokesman Bayo Onanuga.