PRESIDENT Muhammadu Buhari has said that
his government would only raise electricity tariffs when stability is
achieved in the power sector. He stated that government was working to
improve power generation and distribution from its current stage.
This
was even as he stated that there was no assurance that the government
would approve the lifting of restrictions imposed on foreign currency by
the Central Bank of Nigeria, CBN.
President
Buhari spoke through his Vice, Professor Yemi Osinbajo who represented
him as the special guest of honour at the annual general meeting of the
Manufacturers Association of Nigeria, MAN, yesterday.
He
said: “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.
“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.
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 to 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 an 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.”
The President also made it
clear at the meeting that a review of the CBN restrictions on foreign
currency was 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”, he said.
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