The federal government has secured a $500 million loan from the World Bank aimed at improving power distribution in Nigeria’s electricity sector.
This development comes in the wake of last month’s tariff increase for top consumers across the country.
The Bureau of Public Enterprise announced on Thursday that the World Bank had approved the loan in 2021. The loan was incorporated into the government’s borrowing plan this month after meeting certain milestones.
This concessionary loan is designed to boost the financial and technical performance of electricity distribution companies (DisCos), which have faced significant challenges in increasing capacity since Nigeria privatized its electricity sector over a decade ago.
The initiative aims to ensure that DisCos make necessary investments to rehabilitate networks, install electric meters for more accurate billing, and improve service quality for existing grid-connected customers.
Last month, the Nigerian Electricity Regulatory Commission raised tariffs for Band A consumers, who receive a minimum of 20 hours of electricity daily.
This move is part of the government’s effort to reduce subsidies and ease pressure on public finances. However, the tariff hike has faced opposition from stakeholders, businesses, labor unions, and the general public.
The Abuja Chamber of Commerce and Industry (ACCI) expressed concerns that the hike threatens the long-term viability of businesses. The Organised Private Sector in Nigeria warned that the increased tariffs could force about 65% of businesses to close, noting that Nigeria’s current tariff rate is among the highest globally, just below the United States and Germany.
The Nigeria Labour Congress and other labor unions have also protested the tariff increase, calling it anti-people and demanding a reversal.
The standoff between electricity distribution companies and manufacturers has escalated, with the latter refusing to pay the new tariffs.
The Manufacturers Association of Nigeria has lodged a complaint with NERC, seeking a reversal of the tariff hike. DisCos has countered this by threatening to disconnect electricity for non-paying manufacturers.
The federal government is projected to spend around N1.67 trillion on electricity subsidies in 2024, a 170% increase from the previous year.
The World Bank has recommended cutting subsidies to help Nigeria improve its public finances. The country’s electricity sector faces numerous challenges, including a failing grid, gas shortages, high debt, and vandalism.
Despite an installed capacity of 12,500 megawatts, Nigeria produces only about a quarter of that, leaving many reliant on costly diesel-powered generators.
