VZCZCXYZ0028
PP RUEHWEB
DE RUEHUJA #0840 1291556
ZNR UUUUU ZZH
P 081556Z MAY 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 2797
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY
RUEHOS/AMCONSUL LAGOS PRIORITY 9191
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
UNCLAS ABUJA 000840
SIPDIS
DOE FOR GPERSON
TREASURY FOR RHALL AND DPETERS
E.O. 12958: N/A
TAGS: ECON ENRG EPET PGOV NI
SUBJECT: NIGERIA APPROVES MULTI-YEAR ELECTRICITY TARIFF
REF: ABUJA 402
1. (U) The Government of Nigeria (GON) approved a multi-year
tariff order (MYTO) allowing a rate structure that captures
the full cost of delivering electricity. Dr. Ransome Owan,
CEO of the Nigeria Electricity Regulatory Commission, told us
that the MYTO will provide the regulatory framework for
public private partnerships and encourage investment from the
private sector in Nigeria,s power sector. The MYTO
facilitates an orderly transition to a much more efficient
and reliable market-oriented power supply system. The
fifteen year tariff will begin implementation on July 1, 2008.
2. (U) The $1 billion subsidy will ease rate shock by
providing a phased subsidy that allows the full annual
revenue to be calculated; thereby providing the internal cash
flow for salaries, maintenance, repair, and investment in the
power grid. The first year subsidy is $364.1M, second year
$434.7M, and the final year $201.2M.
3. (U) Comment: Nigeria's electricity grid is on the brink of
collapse and the MYTO is a positive step forward. The tariff
is key for private sector participation since it reduces
regulatory risks significantly. One potential hurdle
remaining is that the supplemental budget appropriation may
not be passed before the rate is implemented. End Comment.
SANDERS