The federal government has successfully secured a $500 million loan from the World Bank to enhance power distribution within the electricity sector.
This development follows last month’s tariff increase for top consumers across the nation.
The Bureau of Public Enterprise (BPE) announced on Thursday that the World Bank approved the loan in 2021.
It was only included in the government’s borrowing plan this month after meeting specific milestones.
The loan aims to improve distribution companies’ financial and technical performance, which have struggled to increase capacity since Nigeria privatized its electricity sector over a decade ago.
Background
In 2021, the World Bank approved a $500 million loan to support Nigeria in improving electricity distribution.
This initiative is set to enable electricity distribution companies to make the necessary investments to rehabilitate networks, install electric meters for accurate billing, and enhance the quality of service for those already connected to the grid.
Last month, the Nigerian Electricity Regulatory Commission (NERC) raised tariffs for Band A consumers, who receive a minimum of 20 hours of electricity daily.
This move is part of the government’s strategy to reduce subsidies and alleviate pressure on public finances.
However, the tariff hike has been met with significant opposition from various stakeholders, including businesses, labour and trade unions, and the general public.
The Abuja Chamber of Commerce and Industry (ACCI) criticized the tariff hike, claiming it threatens the long-term viability of businesses.
The Organised Private Sector (OPS) in Nigeria also warned that the increased electricity tariffs could force about 65% of businesses in the country to shut down.
They noted that the current tariff places Nigeria just below the United States and Germany as one of the highest electricity tariffs globally.
Furthermore, the Nigeria Labour Congress (NLC) and other labour unions have protested against the tariff hike, deeming it anti-people and demanding its reversal.
There is a standoff between electricity distribution companies and manufacturers, with the latter calling on their members to refuse the new tariff.
The Manufacturers Association of Nigeria (MAN) has complained to NERC, seeking to reverse the new rates.
In response, the distribution companies have threatened to disconnect manufacturers who do not comply with the new tariffs.
Electricity Subsidy
A report revealed that the federal government would spend approximately N1.67 trillion on electricity subsidies in 2024, marking a 170% increase from the previous year.
The World Bank has recommended subsidy cuts to help Nigeria improve its public finances.
Nigeria’s electricity sector faces numerous challenges, including a failing grid, gas shortages, high debt, and vandalism.
Despite an installed capacity of 12,500 megawatts, the country produces only about a quarter of that, leaving many Nigerians reliant on expensive diesel-powered generators.
>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : BusinessElitesAfrica – https://businesselitesafrica.com/fg-secures-500-million-world-bank-loan-for-electricity/
