LCCI insists cost-reflective tariff is inevitable in Nigeria

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… tasks FG on economic sustainability plan

Worried about the challenges in the power sector especially on tariff increase, the Lagos Chamber of Commerce and Industry, LCCI has stressed that the Cost Reflective Tariff is inevitable for the sustainable development of Nigeria’s power sector.

Speaking at a media briefing with newsmen in Lagos, the President, Lagos Chamber of Commerce and Industry {LCCI}, Toki Mabogunje [Mrs]  said: “We acknowledge the postponement of the planned hike in electricity tariff by the power distribution companies to the first quarter of 2021, considering its impact on households and businesses who are yet to recover from the covid-19 shock.”

According to her : “We understand that the upward review of power tariff is inevitable due to the rising cost of electricity generation in the country. Current tariffs represent 60% of actual cost-reflective tariff, while the shortfall is being covered by the Federal Government through subsidies. Electricity supply is being challenged by inappropriate tariffs which undermines the economics of investment in the power sector and consequently inhibiting investment in the sector.  This situation also impacts adversely on liquidity in the sector.”She added:

“However, equitable billing demands that electricity consumers are metered. This is the only way to engender the confidence of consumers in the billing process.  Metering should therefore be accorded a high priority.”

Also commenting on the deregulation of the downstream sector of the nation’s oil industry, Mabogunje said: “The Lagos Chamber acknowledges the removal of subsidy on Premium Motor Spirit (PMS) and sees it as step in the right direction in rescuing the economy from further fiscal quandary. Fuel subsidy had for long constituted a huge burden on the country’s public finances and constrained Federal Government’s investment in hard and soft infrastructures.

“The transition to a market-based pricing regime in the downstream segment of the oil sector is a move in the right direction. The Petroleum Product Pricing Regulatory Agency (PPPRA) has pledged to monitor market trends and advise Nigerian National Petroleum Corporation (NNPC) and Oil Marketing Companies (OMCs) in determining pump price of PMS every month, which will be based on the prevailing market realities.  However, price fixing by the PPPRA is not consistent with the philosophy of a market driven downstream sector.  It is a contradiction in terms.

“Also, we are deeply concerned that despite various reviews of the Petroleum Industry Bill (PIB) in the last decade, the bill is yet to be signed into law. The non-passage of the bill has deprived the oil sector and the broader economy of enormous private investment inflows into the sector, among other benefits. The Lagos Chamber calls for an expeditious consideration and passage of the revised bill by the National Assembly.”

However in another development, the  chamber tasked the Federal Government on the execution of the Economic Sustainability Plan (ESP).

“We commend the Economic Sustainability Plan (ESP) of the Federal government aimed at ensuring that the economy recovers quickly from the effect of the Covid-19 pandemic and continues on a growth path sustainably. We recognize that the ESP as submitted by the committee seeks to foster new ways of working, producing, learning, and managing public health and safety in the years to come.

“This includes building resilience across critical sectors, including aviation, education, healthcare, internal security, mining, water, and sanitation. We are also aware from the report that government intends to carry out key projects that includes:

A Mass Agricultural Programme (20,000 to 200,000 hectares per state, Create 5 million jobs in the agricultural sector while boosting agricultural production and guaranteeing food security), Extensive Public Works and Road Construction Programme (focusing on both major and rural roads), Mass Housing Programme (to deliver up to 300,000 homes annually), Installation of Solar Home Systems (Project will cover up to 5 million households, serving about 25 million individual  Nigerians who are currently not connected to the National Grid), Strengthening the Social Safety Net, Support for Micro, Small & Medium Enterprises (Implementation of a scheme to support business activities of MSMEs).

“To accomplish these, government has opted for the stimulus package of N2.3tn and intends to  obtain the resources for the stimulus from Special Accounts – N500bn; CBN structured lending – N1.11bn; as well as portions of the resources to be obtained from external bilateral/multilateral sources – N334bn and other funding sources – N302.9bn.

“However, we are concerned in the following areas: The composition of the committee saddled with the ESP largely excluded the organized private sector and they were not actively represented in drawing this plan. While we see this as a significant omission on the part of the government, we would however advise that the OPS be actively involved in ensuring the implementation as well as in monitoring the progress of the recommended activities going forward.

We applaud the intended drive of mass agricultural programme targeting cultivation of 20,000 to 200,000 hectares, creating 5 million jobs. We advise that measures that concerns marketing, postharvest losses as well as government buy-back of produce from this mass production be properly structured and put in place to prevent glut of agricultural products which could lead to depressed prices and disincentive to farmers. It is important that strong emphasis be laid in ensuring market outlets before engaging in production activities.”