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Power Minister Supports Increased Electricity Tariff

The minister of power, works and Housing, Mr. Babatunde Raji Fashola has appeared before the senate committee on power, steel and metallurgy sen cmte on powerto defend the 2016 budget of his ministry.

Shortly after his submission, Fashola told newsmen that the only way out of the power conundrum is to increase the price of electricity as planned by NERC because the current pricing is so uncompetitive that investors could hardly throw in money to generate power.

Fashola in his presentation, proposed a total sum of N432, 379, 756, 953 i.e. (N431, 637, 856, 934 Billion Naira to be appropriated for the Capital Projects, & N741, 900, 019 Million to be appropriated for the Overhead in 2016 Budget). Out of the N431, 637, 856, 934 Billion Naira required for Capital Project, only N99.344, 125, 696 Billion would be funded by Government. The additional sum including a guarantee of N309, 723, 157, 561

Read full text of Babatunde Fashola’s presentation to the senate committee on Power.

INTRODUCTION

Following the recent presentation of the 2016 Appropriation Bill by Mr. President to a joint session of the National Assembly, I have been invited by

this Honorable Senate of the Federal Republic of Nigeria to defend the 2016 Budget Estimates of Power Sector of my Ministry. At this juncture, I would be speaking on:

  1. The Power Sector Budget Performance for the year 2015
  2. Proposed 2016 Budget Estimates of Power Sector including the Parastatals as was submitted to the Ministry of Budget and National Planning; and finally on
  3. The Revenue Profile of the sector

Power is a critical and a strategic need of any country. It’s a driving force for national Development. Electricity generation requires each sector of the value chain (generation, distribution and transmission) to simultaneously perform for the consumer to benefit. The total installed generation capacity is 7,138 MW and the Peak Power Generation achieved to date is 4,810 MW, while the total stranded Power generated is 2,328 MW. The stranded power generation primarily caused by gas supply constraints, transmission grid bottle necks and distribution off-take constraints which include rejection of load by Distribution Companies.

BUDGET PERFORMANCE FOR 2015

In 2015, the then Ministry of Power and its Agencies was appropriated a total sum of N9, 606, 813, 831 (N5.130B was allocated to the sector for capital projects in 2015. This represents a reduction of N54.57b or 91.24% from the sum of N59.81b appropriated in 2014. This figure was a major slash in the ‘envelop’ allocated to the power sector.

It is important to stress that out of N1, 115, 480, 907 and N305, 496, 504 allocated to the Main Ministry for its Capital and Overhead Expenses, only the sum of N557, 740, 453.50 and N189, 631, 931.56 were released and were fully utilized. See the Table A below. However, the Table B shows the Capital Budget Performance as at 2nd Qtr 2015 with a record of 50% budget performance for the sector in the year.

2015 CAPITAL BUDGET RELEASES

TABLE A

MDA TOTAL  CAPITAL  APPROPRIATION 1st QUARTER CAPITAL RELEASE 2ND QUARTER  CAPITAL RELEASE TOTAL CAPITAL RELEASE TOTAL RELEASE OVERHEAD 1ST -4TH QUARTERS 2015 TOTAL RELEASED (Capital + Overhead)
MAIN 1, 115, 480, 907 278, 870, 226.75 278, 870, 226.75 557, 740, 453.50 189, 631, 931.56 747, 372, 385.06
REA 1, 868, 333, 314 467, 083, 328.50 467, 083, 328.50 934, 166, 657.00 0 934, 166, 657.00
NERC 42, 290, 077 10, 572, 519.25 10, 572, 519.25 21, 145, 038.50 0 21, 145, 038.50
NEMSA 1, 003, 580, 153 250, 895, 038.00 250, 895, 038.00 501, 790, 076.00 195, 493, 171.64 697, 283, 247.64
NAPTIN 234, 580, 153 58, 645, 038.25 58, 645, 038.25 117, 290, 076.50 125, 109, 266.00 242, 399, 342.50
NEMLCO 62, 290, 076 15, 572, 519.00 15, 572, 519.00 31, 145, 038.00 38, 896, 041.42 70, 041, 079.42
TCN 535, 246, 846 133, 811, 711.50 133, 811, 711.50 267, 623, 423.00 0 267, 623, 423.00
NBET 268, 198, 474 67, 049, 619.00 67, 049, 619.00 134, 099, 238.00 0 134, 099, 238.00
TOTAL 5, 130, 000,000 1, 282, 500, 000.25 1, 282, 500, 000.25 2, 565, 000, 000.50 549, 130, 410.62 3, 114, 130, 411.12

CAPITAL BUDGET PERFORMANCE AS AT 2ND QTR 2015

TABLE B

MDA TOTAL  CAPITAL  APPROPRIATION(BN) 1st QUARTER CAPITAL RELEASE (BN) 2ND QUARTER  CAPITAL RELEASE (BN) TOTAL CAPITAL RELEASE (BN) UTILIZATION (BN) PERFORMANCE (i.e UTILIZATION TO THE APPROVE BUDGET)
MAIN 1.1 0.28 0.28 0.56 0.56 51%
REA 1.9 0.47 0.47 0.93 0.93 49%
NERC 0.04 0.01 0.01 0.02 0.02 50%
NEMSA 1.0 0.25 0.25 0.50 0.50 50%
NAPTIN 0.23 0.06 0.06 0.12 0.12 52%
NEMLCO 0.06 0.02 0.02 0.03 0.03 50%
TCN 0.54 0.13 0.13 0.27 0.27 50%
NBET 0.27 0.07 0.07 0.13 0.13 48%
TOTAL 5.1 1.29 1.29 2.56 2.56 50%

In 2016 the Federal Government introduced a Zero Based Budgeting (ZBB) approach as a method of budgeting for all MDAs.

It is a budgeting system in which all expenses must be justified for each new period, say every year.

Consequently, this led to grouping the economy into 6 main pillars, namely:-

  • Economic
  • Social Development
  • Infrastructure
  • Governance
  • Environment
  • States and Regional Development

TABLE C

2016 SUMMARY CAPITAL BUDGET BREAK-DOWN

S/N MDAs TOTAL CAPITAL BUDGET TOTAL OVERHEAD

FUNDING SOURCE

GOVERNMENT OTHERS
1 MAIN MINSTRY 27, 000,000,000 205,351,568 27, 000,000,000 0
2 NAPTIN 1,856,463,848 151,231,334 1,856,463,848 0
3 NBET 310,950,055,121 0 1,226,897,560 309,723,157,561
4 NEMSA 1,899,999,891 232,491,039 1,899,999,891 0
5 TCN 72,520,000,000 0 50,000,000,000 22,520,000,000
6 REA 15,341,164,397 102,252,400 15,341,164,397 0
7 NELMCO 2,070,173,678 50,573,678 2,019,600,000 0
8 GRAND TOTAL 431,637,856,934 741,900,019 99,344,125,696 332,243,157,561

Distinguished members of this committee, please find in the table C, above a summary of the 2016 Budget Proposals submitted for your kind consideration. From the summary table the Power Sector has proposed a total sum of N432, 379, 756, 953 i.e. (N431, 637, 856, 934 Billion Naira to be appropriated for the Capital Projects, & N741, 900, 019 Million to be appropriated for the Overhead in 2016 Budget). Out of the N431, 637, 856, 934 Billion Naira required for Capital Project, only N99.344, 125, 696 Billion would be funded by Government. The additional sum including a guarantee of N309, 723, 157, 561 by DMO and or CBN to ensure payment assurance for the entire electricity industry would be obtained from the following sources:-

  1. Competitive Bulk Procurement of Solar funded by GIZ Grant;
  2. N309B Guaranty from FGN (DMO and or CBN) for Power Sector Bond for electricity industry payment assurance;
  3. An additional sum of N22, 520, 000, 000 expected for specific Projects would be financed through other sources, once payment of the TCN wheeling tariff captured in MYTO 2.1 is supported by the liquidity assurance being put in place by NBET.
  4. Negotiation is ongoing on US $100M HEBC; US $200M Rand Merchant Bank; and already disbursed US $50M 2nd tranche of AfDB Budget Support Facility.

If the request is graciously granted the emphasis for the Sector in 2016 Budget Year would be to ensure the completion of ongoing transmission projects, Legacy generation projects and ongoing intervention projects/Programmes, especially :-

  1. 215 MW Kaduna Power Project;
  2. Zungeru 700mw Hydroelectric Power Project;
  3. 3,050 MW Mambilla Hydroelectric Power Project;
  4. 10MW Katsina Wind Farm Projects; and
  5. 81 Transmission Projects to ensure available stranded power stations can evacuate their capacity, etc.

TABLE D

2015 GENERATED REVENUE & 2016 PROJECTED REVENUE PROFILE FOR POWER SECTOR

S/N MDAs GENERATED REVENUE 2015 PROJECTED REVENUE 2016 REMARKS
1 MAIN MINISTER 9,020,000 30,000,000
2 NAPTIN 293,250,000 272,725,000
3 NBET 1,950,000,000 1,009,000,000
4 NEMSA 104,076,736.06 262,185,921
5 TCN N/A SELF ACCOUNTING
6 REA 12,575,000 110,000,000
7 NELMCO N/A NOT A REVENUE GENERATING AGENCY
8 NERC 4,846,154,386.55 16,907,215,700.65 SELF ACCOUNTING
9 GRAND TOTAL 5,265,076,122.61 18,591,126,622

From the summary table D above, the Main Ministry of Power Sector generated the sum of N9, 020,000 only in 2015. The REA, NAPTIN, NBET, and NEMSA generated sums of N12, 575, 000; N293, 250, 000; N1, 950, 000, 000; and N104, 076, 736.06 respectively, totaling N5, 265, 154, 386.55 in the year under review. However, the Sector projected a total sum of N18, 591, 126, 622 to be collected in 2016 Budget Year. Please, see details in Table D.

Honorable Members may wish to peruse the details of the power sectors 2016 projects and programmes as stated below, please.

DETAILS OF 2016 CAPITAL BUDGET POWER SECTOR MAIN MINISTRY

S/N Projects Sub-Activities TOTAL BUDGET FUNDING SOURCE
GOVERNMENT OTHERS
1 Construction and installation of 10KM of 33kV line and associated 2x15MVA 33/11kV sub-station at Ibuzor, Delta State (ONGOING) Construction and installation of 10KM of 33kV line and associated 2x15MVA 33/11kV sub-station at Ibuzor, Delta State (ONGOING) 360, 000,000 360, 000,000
2 Power Improvement in Boji-Boji Agbor and Aliagwai communities in Ika South LGA (ONGOING) CONSTRUCTION AND INSTALLATION OF 300kVA, 11/0.415KV RELIEF SUB-STATION AT DENIS WOINS COMMUNIT NO.2 AND RETICULATION OF FORTY (40) SPANS OF LT LINES (ONGOING) 114,794,930 114,794,930
3 Construction of Ishagu 33kV and 11kV Electricity Distribution Network. (ONGOING) Construction of Ishagu 33kV and 11kV Electricity Distribution Network. (ONGOING) 353,123,500 353,123,500
4 Engineering, Procurement and Construction of Diesel Fuel Storage Tanks with interconnecting piping and Associated components of the Fuel system (ONGOING) DESIGN AND ENGINEERING FOR A COMPLETE DIESEL FUEL STORAGE TANK FARM (ONGOING) 534,408,286 534,408,286
5 CONSTRUCTION OF 215MW LPFO/Gas power plant (ONGOING) ADDITIONAL WORK FOR 215MW LPFO/GAS FIRED KADUNA POWER PLANT (ONGOING) 6,950,875,749 6,950,875,749
6 CONSTRUCTION OF 2X60MVA CONNECTION OF GURARA TO NATIONAL GRID (ONGOING) ADDITIONAL WORKS FOR CONNECTION OF GURARA TO NATIONAL GRID (ONGOING) 1,442,996,611 1,442,996,611
7 REHABILITATION AND TRACE CLEARING OF 35KM OF UBIAJA 33KV FEEDER FROM UROMI TO EWATO (HAVING SCOPE OF WORK: REHABILITATION AND TRACE CLEARING OF 35KM OF UBIAJA 33KV FEEDER FROM UROMI TO EWATO (ONGOING) REHABILITATION AND TRACE CLEARING OF 35KM OF UBIAJA 33KV FEEDER FROM UROMI TO EWATO (HAVING SCOPE OF WORK: REHABILITATION AND TRACE CLEARING OF 35KM OF UBIAJA 33KV FEEDER FROM UROMI TO EWATO (ONGOING) 94,429,000 94,429,000
8 Installation of 300kVA 11/0.415kVand Construction of 2km 11kV line at Adigbe in Owode Obafemi LGA, Ogun State (ONGOING PROJECT) Installation of 300kVA 11/0.415kVand Construction of 2km 11kV line at Adigbe in Owode Obafemi LGA, Ogun State (ONGOING PROJECT) 30,323,530 30,323,530
9 PROCUREMENT AND INSTALLATION OF 75NOS 500KVA, 33/0.415 TRANSFORMERS IN ABUJA, IMO, ANAMBRA, ABIA AND EDO (NEW) PROCUREMENT AND INSTALLATION OF 75NOS 500KVA, 33/0.415 TRANSFORMERS IN ABUJA, IMO, ANAMBRA, ABIA AND EDO (NEW) 397,502,100 397,502,100
10 ELECTRICITY IMPROVEMENT IN LANGTANG NORTH AND LANGTANG SOUTH IN PLATEAU (ONGOING) ELECTRICITY IMPROVEMENT IN LANGTANG NORTH AND LANGTANG SOUTH IN PLATEAU (ONGOING) 37,000,000 37,000,000
11 Electrifying Nigeria (Light up Nigeria) Electrifying Nigeria (Light up Nigeria) 300,000,000 300,000,000
12 SUPPLY AND INSTALLATION OF 33KV VCB METAL CLAD SWITCH GEARS FOR CONTROL AND PROTECTION FEEDERS (ONGOING) DESIGN, MANUFACTURE, SUPPLY, ERECTION AND COMMISSION 33KV SWITCH GEAR KOLO CREEK (ONGOING) 325,458,000 325,458,000

 

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