The World Bank has said the Federal Government of Nigeria is spending $1.5bn (N568.5bn at N379/$ exchange rate) annually to fund electricity tariff shortfalls, the World Bank has said.
According to the global financial institution, this amount is speculated to increase if the country fails to take the right action.
The bank also disclosed that for every ₦10 worth of electricity received by distribution companies, ₦2.50 was lost due to energy theft and poor distribution infrastructure
According to the bank disclosed report on Nigeria Power Sector Recovery Programme, “FGN (Federal Government of Nigeria) is spending $1.5bn per year to fund tariff shortfalls and this could continue to rise if action isn’t taken,” the bank stated in the document.
The World Bank noted that Nigeria’s power sector was operationally inefficient with unreliable supply exacerbated by high losses and lack of payment discipline.
Referencing the various arms of the sector, the bank stated that power generation was characterised by high non-available capacity. This is because many plants were out on fault, damage, maintenance, major overhaul, etc.
“Gas and transmission constraints lead to non-operational capacity. Resolving policy/regulatory challenges and Disco (distribution companies) issues are key to free up stranded capacity,” the bank stated.
In the transmission sector, the bank said infrastructure in this arm of the industry remained inadequate and congested, stressing the need to invest in upgrades and maintenance.
Also, in the power distribution arm, the bank observed that the Discos on average currently report 50 per cent Average Technical Commercial and Collection losses.
It added that this was far above the less than 15 percent international good practice and the 26 per cent that was allowed in the sector’s Multi Year Tariff Order.
The bank said, “For every ₦10 worth of electricity received by Discos, ₦2.50 was lost due to energy theft and poor distribution infrastructure.
“This reflects low investments in distribution networks and metering creating lingering liquidity challenges.”
Similarly, on policy and regulatory environment, the bank stated that there had been inconsistent implementation of tariff regulation, enforcement of market contracts, and policy direction noting that Discos on average reported 50 percent ATC&C losses which meant that only half of the energy generated led to collected revenue.
The bank stated that the capital expenditure allowance for all 11 Discos combined was N56bn and that this was far below what was needed.
However, the bank stated that Nigeria now had the largest number of un-electrified people globally and the trend was worsening stressing that of the electrified, the supply was very unreliable with widespread blackouts.
It stated that a holistic approach was necessary to address the power sector situation in a sustainable manner.