ICAN advocates short-term tax breaks to DisCos

By Chinwendu Obienyi

The Institute of Chartered Accountants of Nigeria (ICAN) has urged the Federal Government and Nigerian Electricity Regulatory Commission (NERC) to consider additional short-term tax breaks and other incentives to the DisCcos, as a form of production-focused subsidy (rather than consumption-focused subsidy), as an alternative to rate hike.

This is coming after the recent application to increase the price of electricity amidst the overwhelming series of policy resets made by the new administration (removal of petroleum subsidy which had left an over 100 per cent increase in petrol price and the unification of all segments of the Nigerian forex market), has raised different criticisms with its timing and increase on the common man.

In a statement titled; Re-Application for Rate Review by the Electricity Distribution Companies, the President, ICAN, Dr Innocent Okwuosa, said that the institute has reviewed the applications by the seven DisCos and added that Chartered accountants are well placed to support the DisCos in actualising these areas of improvement.

Whilst recommending that NERC and the DisCos should defer the implementation of a rate increase to a future period, Okwuosa noted that Nigerians are still grappling with the effect of macroeconomic policy decisions such as the removal of petrol subsidy and unification of the foreign exchange rates.

According to him, the proposed increases at this time would further worsen the plight of the masses and push more Nigerians into multidimensional poverty.

He further added that the increase would significantly increase the cost of doing business, particularly for SMEs, stating that enterprises may be unable to pass on the additional costs to their customers, increasing the risk of business closures, and further worsening the unemployment rate.

“Government and NERC should consider additional short-term tax breaks and other incentives to the DisCos, as a form of production-focused subsidy (rather than consumption-focused subsidy), as an alternative to rate hike. The Discos would however need to demonstrate better accountability and transparency in governance and reporting. This is an area in which chartered accountants can provide valuable support. The DisCos should invest further in their distribution network to reduce technical losses and build a platform for sustainable electricity distribution”, Okwuosa said.

The ICAN President thereafter reiterated that the institute members possess the expertise and experience to support the Commission and Discos in providing deep insights on the inputs, market conditions and assumptions related to the proposed price increases.