African countries should stop energy subsidies – AfDB

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Lagos, Jan. 20, 2023 -The African Development Bank (AfDB) has advised African countries to stop subsidies on energy consumption to release more resources to bridge the deficit in production.

It said that energy subsidies was one of the reasons why Africa countries were experiencing energy insecurity.

Energy insecurity means energy deficit when the amount of energy consumed is greater than the amount of energy produced.

The AfDB gave this advice in its 2023 African’s Macroeconomic and Performance Outlook report which was released on Thursday, January 19, 2023.

In the report, the AfDB explained that energy subsidies are controversial due to their distortionary nature.

“This is despite the fact that energy subsidies are the most available and essential fiscal and political tools that governments on the continent use to protect households against potential welfare losses arising from food and energy prices and other exogenous shocks.

“Energy consumption in Africa is lower than in other comparable regions due in part to its low level of energy security, reflecting inadequate production to meet the rising demand.

“In 2019, the per capita consumption of electricity was 550 kilowatts per hour (kWh), compared with 2,300 kWh in Asia.

“The high disparity in energy security and consumption across low-income countries, mainly non-oil exporting on one hand and high-income countries on the other hand, could also be attributed to the level of energy subsidies,” the bank said.

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