Federal Government Promises IMF That Nigerians Will Pay Higher Electricity Tariffs

One of the promises, or duties, which the government made in an offer to guarantee the executive board of the IMF of its status to reposition the Nigerian economy after the pandemic, is that Nigerians would pay a full cost-reflective for power in 2021.

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Federal Government Promises IMF That Nigerians Will Pay Higher Electricity Tariffs

Federal Government has made a promise International Monetary Fund while seeking the $3.4bn emergency financial assistance recently approved for Nigeria that Nigerians will pay much higher tariff for power in 2021.

The Executive Board of the IMF endorsed the Rapid Financing Instrument, which the Federal Government intends to use to address the monetary effect of the COVID-19 pandemic in the nation, on April 28.

A Letter of Intent, mutually signed by the Finance Minister, Zainab Ahmed, and the Governor of Central Bank of Nigeria, Godwin Emefiele, and addressed to the IMF Managing Director, Kristalina Georgieva, showed that the Federal Government made various promises to the fund in order to secure the financial assistance.

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One of the promises, or duties, which the government made in an offer to guarantee the executive board of the IMF of its status to reposition the Nigerian economy after the pandemic, is that Nigerians would pay a full cost-reflective for power in 2021.

The Federal Government also told the IMF it intends to cap electricity tariff shortfalls to N380bn in 2020.

“We are also advancing in our power sector reforms – with technical assistance and financial support from the World Bank – including through capping electricity tariff shortfalls this year to N380bn and moving to full cost-reflective tariffs in 2021,” the Federal Government said in the letter.

On January 4, the Nigerian Electricity Regulatory Commission endorsed an increase in electricity tariff for the 11 electricity distribution companies in Nigeria.

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It, in any case, couldn’t actualize the levy increment after worker’s guilds, legislators and different Nigerians kicked against the move, which would have initiated on April 1, 2020.

In spite of the fact that the NERC-inspected tariff was not cost-effective enough as required by power wholesalers, it indicated that Nigerians would pay more for power on the off chance that it had been actualized.

This, along these lines, suggests that once the administration enforces the payments of full cost-reflective duty, in accordance with the promise to the IMF, power users may pay far higher than what was anticipated in NERC’s ongoing tariff review.

The commission had explained that its directive on the January 2020 tariff regime for different Discos superseded the earlier one issued on the subject matter.

According to details of the review published by the commission in January, for the Abuja Electricity Distribution Company, residential customers in R3 category who were paying N27.20 per unit would have been paying N47.09, had the regime started on April 1, 2020.

The customers would have paid N19.89 more per unit.

The NERC audit likewise indicated that for Ikeja Electricity Distribution Company, clients on the R3 class who were paying N26.50 per unit would have paid N36.92 per unit from April 1.

The new rate added up to an extra N10.02 per unit.

In a similar vein, passing by the NERC’s slowed down duty plan, Enugu Electricity Distribution Company private (R3) clients who were paying N27.11 per unit in 2015 would have paid N48.12 per unit from April 1, 2020.

The new rates were, nonetheless, required to be postponed after clients kicked intensely against the turn of events.

Yet, passing by the Federal Government’s guarantee to the IMF, a usage of cost-intelligent taxes in 2021 implies that Nigerians would pay even a lot higher for power than the rates which NERC had intended to charge from April 1.

The planned revenue drive also includes a hike of excise fees and removal of tax exemptions.

“First and foremost, we will revert to our government’s planned medium-term fiscal consolidation path – which includes increasing revenue to 15 per cent of GDP through further VAT reforms, rise in excises, and removal of tax exemptions – once the crisis passes,” the letter said.

The Federal Government additionally promise the IMF that it was attempting to decrease its spending shortfall to under three percent of GDP in accordance with the Fiscal Responsibility Act.

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