PM NEWS!!!!Electricity tariffs cannot remain at current level – Osinbajo

Until there is stability in the power sector, electricity tariffs
cannot remain at the levels they are currently, according to
Vice President Prof. Yemi Osinbajo, SAN.
Speaking Thursday afternoon at the Annual General Meeting
of the Manufacturers Association of Nigeria, MAN, the Vice
President who represented President Muhammadu Buhari
as the Special Guest of Honor said truth of the matter
regarding electricity tariffs is that “at this point, if we wanted
to have a cost effective tariff, the only way is to service that
core value chain, the only way is to ensure that we are
paying and compensating the value chain -from generation
down to distribution- a cost effective tariff.”
In a similar vein, the Vice President also made it clear at the
meeting that a review of the CBN restrictions on foreign
currency is not imminent.
His words: “I want to make it absolutely clear that the
position is not that a review of the CBN restrictions on
foreign exchange is imminent. It is a short term measure,
not a policy, and as things improve, we will have a
discussion about what to do. But certainly not that a review
is about to take place.”
Osinbajo spoke further on the electricity tariffs:
“Power is of course crucial and as the president said in his
inaugural address, to which President Mbeki referred, the
question of power is one that is absolutely crucial to
manufacturing and practically everything else and we
shouldn’t be rejoicing at 4000 Megawatts of power. But the
problems are historical and several of those problems will
need tackling head on, on a day-by-day basis.
“One aspect of the problem that i want to speak about,
because this also affects manufacturing, is the whole idea of
the tariffs. Of course the president of MAN just said that we
have one of the most expensive electricity in the world.
“Now, the truth of the matter is that at this point, if we
wanted to have a cost effective tariff, the only way is to
service that core value chain, the only way is to ensure that
we are paying and compensating the value chain -from
generation down to distribution- a cost effective tariff.
You cannot have that cost effective tariff without some pay.
At the moment, (when you compare) how much it costs to
produce power, and the amount of power that is generated,
the losses on account of distribution are significant. In some
cases you have up to 40% losses in distribution, and of
course it is the DisCos that have to take that burden.
The GenCos (generating companies) are producing power
but they expect to be paid for all the power that they
produce. Now, if 40% of this is lost, it means the DisCos
cannot collect 40%, but they have to pay for it somehow. So
government has to come in and play some kind of role in
order to ensure that the whole value chain is paid for.
“But the most important thing is that the cost of power is
reflective of costs that have to be borrowed at every stage of
the value chain and today the cost of power, if it’s going to
be reflective in any way is simply what it is. It will be very
difficult indeed, except if we are going introduce yet another
subsidy and by the way, a fair amount of that goes on
already in the way that government supports the GenCos
and the DisCos.
“But i think that we must be ready to accept that for a while,
until things stabilize somewhat, tariffs cannot remain at the
levels at which they are today, they cannot remain at that
level, and that just simply is the truth of the matter.
“It certainly means that there may be higher costs, but I
don’t think that a option of not having power is really what
we want. The real issue of course is that at the end of the
day, some of the cost goes to the consumer, but a cost
reflective tariff is an absolute necessity, otherwise,
privatization and all of that simply doesn’t make sense.”