June 23, 2024
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Nigeria Govt Spends N375.8bn on Electricity Subsidies in Nine Months

The Nigerian Electricity Regulatory Commission, (NERC) says the Nigerian government spent N375.8 billion on electricity subsidies from January to September 2023.

While disclosing its first, second, and third quarters of 2023 reports, NERC explained that the power distribution companies billed electricity users a total of N1.06 trillion nationwide during the nine months, during which they collected N782.6 billion.

The commission added that electricity consumers paid N782.6 billion for the commodity during the period.

On the subsidy in its just-released third-quarter 2023 report, NERC said “In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff shortfall funding. This funding is applied to the NBET (Nigerian Bulk Electricity Trading Company) invoices that are to be paid by Discos.

“The amount to be covered by the Disco is based on the tariff that they are allowed to charge and set out as their Minimum Remittance Obligation in the periodic Tariff Orders issued by the Commission.

“It is important to note that due to the absence of cost-reflective tariffs across all Discos, the government incurred a subsidy obligation of N204.59 billion in 2023/Q3 (average of N68.20bn per month), which is an increase of N69.37 billion (+51.3 per cent) compared to the N135.23 billion (average of N45.08 billion per month) incurred in 2023/Q2; this increase is largely attributable to the government’s policy to harmonise exchange rates.

“The rise in the government’s subsidy obligation meant that in 2023/Q3, Discos were only expected to cover 45 per cent of the total invoice received from NBET. For ease of subsidy administration, the MRO is limited to NBET only with the MO (Market Operator) being allowed to recover 100 per cent of its revenue requirement from the Discos.”

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