Mrs. Zanaib Ahmed, Minister of Finance, Budgets and National Planning, revealed that Federal Government has completely taken away electricity subsidy and is gradually planning to get rid of fuel subsidy through approval by the National Assembly.
This therefore means that FG’s power sector intervention fund which has now been taken off will allow the electricity market to run on its own, leaving demand and supply, and market participants to determine prices.
This is coming at a time when the country’s power sector is facing a revenue shortfall due to a tariff regime that is not cost-reflective as data from the Nigerian Bulk Electricity Trading Plc (NBET) showed that the tariff being collected by distribution companies is below 50 per cent of their invoices.
The Finance Minister made this disclosure on Thursday during the Media Roundtable on Ukraine – a virtual meeting sponsored by the International Monetary Fund (IMF) with the theme: “The Political Economy of Fiscal Reforms in Africa”,
According to her, electricity subsidy was quietly ended through subtle adjustments of prices, spread over a period of time. In effect, the government has freed N30 billion monthly as cost of augmenting the cost of electricity in the country.
The Minister revealed that petrol subsidy is becoming a huge burden which the Government will no longer accommodate as it is raising its expenditure beyond expectations, especially with current high prices of crude oil.
She further revealed, in same manner, the FG is already planning a budget amendment that will see petrol subsidy gradually removed, once approved by the National Assembly, noting that the Government can no longer reckon with previously chosen July deadline set for its removal.
She said, “We are cleaning up our subsidies. We had a setback, we were to remove fuel subsidy by July this year but there was a lot of push back from that policy position.
“We have elections coming and also because of the hardship that companies and citizens went through during the COVID-19 pandemic, we just felt that the time was not right, so we pulled back on that.
“But we have been able to quietly implement subsidy removal in the electricity sector and as it is, as we speak, we don’t have subsidies in the electricity sector. We did that over time by carefully adjusting the prices at some levels while holding the lower levels down.
“Fuel subsidy is a huge problem for us. It has thrown up our deficits too much higher than we planned. What is happening now with the global oil prices is also going to worsen matters but the current review that we are doing is to hold the subsidy at the level in which we planned.
“We are currently doing a budget amendment to accommodate incremental subsidy (removal) as a result of the reversal of the decision and we want to cap it at that. Hopefully, the parliament will agree with us and we are able to continue with our plan for subsidy (removal) otherwise the way things are going we will not be able to predict where we will be,” she said.