Subsidy addiction: Nigeria budgets N300bn for electricity in 2022

Nigeria plans to spend N300 billion subsidising electricity in 2022, Ben Akabueze, director-general of the Budget Office said on Friday, putting paid to earlier claims by the government in July to quit the practice next year.

Akabueze, who was speaking during a public presentation of the 2022 budget proposal, said the budgeted sum will be used to bridge the gap that has remained between the cost of providing electricity and the amount collected by the distribution companies.

“Although there have been some improvements in collection, there is still a shortfall which the government has to bear,” Akabueze said.

Vice President Yemi Osinbajo had in July said the government will end most of its subsidy payments in the electricity sector, estimated at N30 billion monthly, in 2022.

Osinbajo, who disclosed this at the opening of the 14th Nigerian Association for Energy Economics/IAEE conference in Abuja on July 27, said the government expected the electricity sector to generate its revenue from the power sector market.

Read also: FG to end electricity subsidy by January 2022

“It is anticipated that all electricity market revenues will be obtained from the market with limited subsidy from next year as reforms in metering and efficiency with the DISCOs continue to improve,” Osinbajo said at the time.

“Accelerated investment in transmission and distribution, over $3 billion will be put into this sub-segment of the electricity value chain that will put us on the path to delivering 10 gigawatts through the interventions of the Central Bank of Nigeria (CBN), Siemens partnership, World Bank and Africa Development Bank, and others,” he said.

Nigeria is struggling to keep the lights on in many parts of its vast land. A promise that there would be an improvement in supply following a tariff increase last year has failed to materialise.

As much as 78 percent of Nigerians have less than 12 hours daily access to electricity, according to the World Bank.

Subsidies have been a drain on the government’s weak finances but plans to end the practice, whether it is for electricity or petrol, have often dragged on.