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Although this move is contradictory to what operates these days in view of the fact that both the government and some Nigerians have often argued that subsidising sectors whose functions are determined by the forces of demand and supply has never allowed for efficiency.
The obvious reason for doing this is because there has not been substantial improvement in power generation that would have given basis for such removal. By the estimation of the powers that be, by now the nation should have been generating electricity in the region of about 10,000 megawatts.
However, the move for extension may be appropriate in order to mitigate the effect of the expected tariff increment that would come up very soon.
The Nigerian Electricity Regulatory Commission (NERC) said it would soon announce a new tariff regime considering how best to balance the competition between utilities' price and consumption satisfaction, while also trying to recover all credible and allowable costs.
"Nigerians should expect the new tariff announcement in the next one or two months," the commission stated.
This revelation is coming on the heels of the Federal Government revelation that the power sector will require an average investment of $100billion for the next 10 years, which translates to an annual investment of $10billion in generation, transmission and distribution.
Speaking at the 2011 annual power conference with the theme 'Closing the Gap between Plan and Implementation' organised by BusinessDay, Sam Amadi, chairman, Nigerian Electricity Regulatory Commission said NERC has adopted a price cap incentive regulation regime with the view that it may facilitate higher efficiencies across the industry segments. "In transmission and distribution I observe that the incentive based price cap regulation, similar to what we have adopted here in Nigeria, delivered significant efficiency gains in England and Wales," he said.
In his keynote address, Nuhu Somo Wya, minister of state for Power, noted that every economy and any business need stability not only in power provision but also in policy. "On the eve of our national elections as we continue to drive towards reform of the power sector and the delivery of reliable power, the political will and commitment to reform from the highest quarters of government has not declined. The path that President Goodluck Jonathan has paved to transform the power sector and lead us to a fresh, new and brighter day is irreversible," he said.
Wya also noted that the erratic and unpredictable nature of electricity supply has brought about a deep and bitter sense of frustration across the country. "To address this issue, the government launched the roadmap for power sector reform. This roadmap has a two pronged approach- to maximise power from the current system and to serve as a blueprint for the acceleration of reform activities already mandated under Electric Power Sector Reform (EPSR) Act of 2005. This legislation is the basis for all reforms in the sector," he further observed.
Barth Nnaji, chairman, Presidential Task Force on Power, also noted that Federal Government is totally focused on power delivery in Nigeria. "This is in two ways -short term and long term delivery," he said, adding that 3,800 - 4,000 mega watts for a country of 150million people is still nothing. He noted that the Federal Government targets to achieve 40,000 mega watts by 2020. "We believe that the country has already opened up for investment in the power sector. A lot of good news from tariff will come from the regulators," he added.
Bolanle Onagoruwa, director general, Bureau of Public Enterprise (BPE), noted the enablers of power sector key reform and privatisation. According to her, these include- political will and government clear policy directives, review of Multi Year Tariff Order (MYTO) to reflect returns on investment in the sector; resolution of labour issues; setting-up and funding of bulk trader and Nigeria Electricity Liability Management Company (NELMCO); regulatory clarity and support; develop regulatory capacity to monitor the level and appropriateness of capital investment due to its long-run impact on tariff.
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