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Experts: How CBN Interventions Can Save Power Sector

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Experts with deep knowledge of the Nigerian power sector have posited that current interventions by the Central Bank of Nigeria (CBN) remain a major avenue to ease burden on consumers, with the planned removal of subsidy.

The apex bank had introduced the Power and Aviation Intervention Fund (PAIF), of about N300 billion, Nigerian Electricity Market Stabilisation Facility (NEMSF) of about N213 billion, the N140 billion Solar Connection Intervention Facility totalling over N600 billion tariff shortfall intervention and the N120 billion intervention designed for mass.

In the last eight years, the CBN has spent roughly N1.5 trillion to keep the nation’s power sector afloat although the sector was privatised with the intention of surviving by itself.
Although most stakeholders insisted that the interventions remain critical, especially in ease the liquidity crisis and attracting further interventions, they maintained that the interventions should be tweaked in a manner that reduces the burden faced by Nigerians.

Former President and Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola said the strongest argument in favour of subsidy was the need for government to protect the welfare of the people by underwriting some of their basic household and infrastructure needs.

He noted however that the argument about removal of electricity subsidy was not the most fundamental to Nigeria at the moment.
“Rather, the inability to supply the electricity needs of Nigerians, in the right quality and quantities. If supply deficit could be remedied, the cost of electricity and energy generally would be cheaper to Nigerian households firms and even government compared with the cost of alternative sources of power to them,” he stressed.

An energy expert, Prof. Wunmi Iledare said that interventions by the CBN as a repayable loan was understandable, but added that the current structure of the electricity market in the country could mar the interventions.
He maintained that while it is good that banks are targeting spending, subsidy may be a politically expedient instrument not economic efficiency.

Iledare argued that a way to bring subsidy to an end was metering and decentralisation of power management and services .
Also, Eseosa Onaghinon, another energy expert, stated that the energy sector must be rid of inefficiencies, which is usually passed on to consumers, adding that there is about 40 per cent inefficiency losses between transmission and distribution.

“If we do not address such losses that occur, we might as well get into a trap where it’s an unending discussion of subsidy though it is actually continuous inefficiencies covered up as subsidies,” Onaghinon stated.
The CBN interventions over the years have helped to give the sector relative stability as the industry struggles with huge liquidity problems.

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