The Federal Government borrowed $4.2 billion (app. N1.3 trillion) in the last four years to ensure power generation companies and gas suppliers received enough payment to continue to generate electricity, a World Bank report has said.
According to the report, this is a result of revenue shortfall occasioned by Nigerians paying less than the cost of electricity produced.
The report titled, ‘Resilience through Reforms’ was published on Tuesday, June 15.
The World Bank stated that the Federal Government would have to cough up an additional N3.08tn through 2023, if current performance levels and low tariffs do not change.
“To ensure that Gencos and gas suppliers receive enough payments to continue generating electricity, since 2017 the FGN has borrowed a total of N1.3tn ($4.2bn).
“In 2019 total FGN support reached N524bn ($1.7bn), 0.4 per cent of GDP – higher than the N428bn budget for health and just 20 per cent less than the N650bn budgeted for education,” the report stated in part.
The report stated that although all six generation companies and eleven distribution companies have been privatised, the Federal Government through the Nigerian Bulk Electricity Trading Company (NBET) buys electricity from the GENCOs and independent power producers before reselling to the Discos.
The World Bank stated that market forces should ideally determine tariffs in the power sector but the Nigeria Electricity Regulatory Commission (NERC) has continued to do so.