Tackle subsidies, privatise power transmission, NESG tells FG

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                            Chief Executive Officer, NESG, Mr. ‘Laoye Jaiyeola

The Nigerian Economic Summit Group has advised the Federal Government to address subsidies and privatise the transmission segment of the nation’s power sector.

The NESG, a private sector-led think-tank, said the government should review all current subsidies or market intervention programmes such as the fuel subsidy, electricity and foreign exchange market interventions by the Central Bank of Nigeria.

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It said in its 2020 Macroeconomic Outlook, which was unveiled on Wednesday in Lagos, that the subsidies were creating distortions across markets.                                                                                                                                            “Continuation of these subsidy programmes usually discourages investments and inflow of needed capital in operating sectors. Hence, gradually ending these programmes and repositioning government as a regulator will help to free some funds for infrastructure development,” the group said.

The Federal Government on May 11, 2016 announced a new petrol price band of N135 to N145 per litre, a move that signalled the end to fuel subsidy payment to private marketers.

But the government later resorted to subsidy regime following the increase in the landing cost of petrol on the back of rising crude oil prices.

The Nigerian National Petroleum Corporation currently bears the subsidy on the product.

The NNPC has been the sole importer of petrol into the country for over two years as private oil marketers stopped importation as the landing cost of the product was said to be higher than the official pump price.

The NESG said the government should complete the power and energy sector deregulation process by opening up the transmission segment of the power value chain to private participation and investments.

“In doing this, three criteria should be considered for willing and prospective investors – managerial experience, technical expertise and financial capabilities. These are key to the success of the power/energy sector reform road map in Nigeria,” the group said.

The Federal Government privatised in November 2013 the successor distribution and generation companies carved out of the defunct Power Holding Company of Nigeria.

In August last year, the Vice President, Prof. Yemi Osinbajo, said the Federal Government was creating policies that would open up the nation’s electricity market to new investors in generation, transmission and distribution infrastructure.

The NESG said the heightened tension between the United States and Iran as well as the commitment of the Organisation of Petroleum Exporting Countries to control supply in order to sustain higher prices will stiffen oil price in 2020.

It said, “In order to take advantage of the increase, Nigeria will need to implement reforms in the oil and gas sector to attract large investments into the upstream subsector and ultimately shore up oil production.

“The leadership of the National Assembly has made commitments to focus on the Petroleum Industry Bill in 2020 and progress in the industry will largely depend on the speed of passage of the industry-wide legislation.”



Source: Punch

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