‘7.5 VAT hike will push up electricity generation cost’

THE Federal Government’s decision to increase Value Added Tax (VAT) from five per cent to 7.5 per cent will worsen the already bad condition of operators of thermal plants across the country, the Executive Secretary, Association of Power Generation Companies (APGC), Dr Joy Ogaji, has said.

She said many of the operators were struggling to survive due to the rising cost of operation, especially that of gas, adding that with the implementation of the new VAT, it means that electricity generation companies will be in for more difficulties, as this could result in increased cost of electricity generation .

The Federal Government had last October announced its intentions to increase VAT from five per cent to 7.5 per cent across board ostensibly in an attempt to raise more money to meet its financial obligations.

However, Ogaji said the move was capable of inflicting more hardship on operators in the power sector, particularly the electricity generation companies.

Speaking with The Nation, over the weekend, Ogaji said the six power generation companies (GenCos), which are facing difficulties, will be worse hit.

She also said the 11 distribution companies(DisCos) will be affected with the VAT increase.

“The operations of the GenCos have suffered untold hardship as a result of payment of five per cent VAT on the cost of gas. The firms have been paying VAT on supplies and transportation of gas since they took over the assets of the defunct Power Holding Company of Nigeria (PHCN) after the privatisation exercise in 2013.

“The 7.5 per cent VAT increase, if implemented this January, will further increase the cost of electricity generation, unless gas to power is exempted from VAT,” Ogaji said.

The APGC Executive Secretary also pointed out that some policies of the government were hitting hard on operators, warning that any attempt to implement the increase in VAT will worsen the situations in the sector.