The International Monetary Fund, IMF, has warned the Nigerian Government to stop electricity tariff. This was contained in a report published recently by the world monetary body.
IMF told Nigerian Government that the subsidies would guzzle three per cent of the nation’s Gross Domestic Product in 2024. This, it maintained is against the one per cent in 2023.
According to the report, the IMF praised the Federal Government for, among other things, phasing out “costly and regressive energy subsidies”.
It said this was critical to creating fiscal space for development spending and strengthening social protection while maintaining debt sustainability.
Recall that President Bola Tinubu removed fuel subsidies during his inauguration on May 29, 2023.
But advising the Government, IMF noted that “adequate compensatory measures for the poor were not scaled up promptly. The monetary body stated that subsequently paused over corruption concerns. Capping pump prices below cost reintroduced implicit subsidies by end-2023 to help Nigerians cope with high inflation and exchange rate depreciation.”
IMF also acknowledged that the price of electricity had tripled for high-use premium consumers on Band A feeders. And for the 15 per cent of the 12 million customers who account for 40 per cent of electricity usage.
Recall that Nigerians have being agitating for the reversal of the Band A tariff from N206.80 per kilowatt-hour to N68. But IMF submitted that “the tariff adjustment will help reduce expenditure on subsidies by 0.1 per cent of Gross Domestic Product. It said that it will continue to provide relief to the poor, particularly in rural areas”.
“Once the safety net has been scaled up and inflation subsides, the Government should tackle implicit fuel and electricity subsidies.”
“With pump prices and tariffs below cost-recovery, implicit subsidy costs could increase to 3 per cent of GDP in 2024. This is up from 1 per cent in 2023. These subsidies are costly and poorly targeted. With higher income groups benefiting more than the vulnerable,” IMF said.
“As inflation subsides and support for the vulnerable is ramped up, costly and untargeted fuel and electricity subsidies should be removed. While, e.g., retaining a lifeline tariff,” IMF reechoed.
The body projected that the implicit fuel subsidy could gulp as high as N8.4tn in 2024. This is up from N1.85tn in 2023, N4.4tn in 2022, N1.86tn in 2021 and N89bn in 2020.
“The electricity subsidy being paid to customers under Band B, C, D, and E was projected to stand at N540bn by the end of 2024.
Recall that the Nigerian National Petroleum Company Limited and the Minister of State for Petroleum (Gas), Heineken Lokpobiri, have repeatedly debunked claims that the Federal Government was paying fuel subsidies through the back door.
source: PUNCH