The Federal Government has assured the International Monetary Fund (IMF), that Nigerians will pay much higher tariff for power in 2021, while seeking the $3.4bn emergency financial assistance recently approved for Nigeria.
It was on 28 April that the Executive Board of the IMF approved the Rapid Financing Instrument, which the Federal Government says it plans to use to address the economic impact of the COVID-19 pandemic in Nigeria.
A Letter of Intent, jointly signed by the Finance Minister, Zainab Ahmed, and the Governor of Central Bank of Nigeria, Godwin Emefiele, and addressed to the IMF Managing Director, Kristalina Georgieva, showed that the Federal Government made a number of promises to the fund in order to secure the financial assistance.
In the letter of intent sent to the IMF, the Federal Government has laid out some measures it intends to put in place to ensure Nigeria comes out of the current pandemic a stronger economic entity, and one of them is that Nigerians would pay full cost-reflective tariff for power in 2021.“We are also advancing in our power sector reforms – with technical assistance and financial support from the World Bank – including through capping electricity tariff shortfalls this year to N380bn and moving to full cost-reflective tariffs in 2021,” the Federal Government said in the letter.
The Nigerian Electricity Regulatory Commission (NERC), had on January 4th, approved an increase in electricity tariff for the 11 electricity distribution companies in Nigeria. However, the increment could not be implemented as labour unions, lawmakers and other Nigerians kicked against the move, which was supposed to kick start on April 1, 2020.
The Letter of Intent also quoted the Federal Government hinting at further increment in Value Added Tax as part of plan to increase its revenue to 15 per cent of Gross Domestic Product.
“First and foremost, we will revert to our government’s planned medium-term fiscal consolidation path – which includes increasing revenue to 15 per cent of GDP through further VAT reforms, rise in excises, and removal of tax exemptions – once the crisis passes,” the letter said.