Electricity subsidy gulps N376bn, consumers pay N783bn

The Federal Government of Nigeria has expended a total of N375.8 billion on electricity subsidies from January to September 2023, according to a report by Okechukwu Nnodim and Edidiong Ikpoto.

During this same period, power consumers in the country paid a total of N782.6 billion for electricity, despite experiencing blackouts in many regions.JAMB Result

This information, sourced from the Nigerian Electricity Regulatory Commission (NERC), a Federal Government agency, indicates that the government provided subsidies across the first three quarters of 2023 to bridge the gap in electricity funding.informationguidenigeria

The report reveals that power distribution companies billed consumers a total of N1.06 trillion nationwide over the nine-month period. However, they were only able to collect N782.6 billion of this amount. The shortfall in collection, alongside the frequent power outages, underscores the challenges in the Nigerian power sector.

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The subsidy payments by the government increased progressively over the three quarters: N36 billion in the first quarter, N135.2 billion in the second quarter, and N204.6 billion in the third quarter. The fourth-quarter figures were not available at the time of the report.JAMB Portal

The NERC, in its third-quarter report for 2023, attributed the need for these substantial subsidies to the absence of cost-reflective tariffs in the Nigerian electricity market.

It 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.NYSC Portal

“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 N204.59bn in 2023/Q3 (average of N68.20bn per month), which is an increase of N69.37bn (+51.3 percent) compared to the N135.23bn (average of N45.08bn 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 percent of the total invoice received from NBET. For ease of administration of the subsidy, the MRO is limited to NBET only with the MO (Market Operator) being allowed to recover 100 percent of its revenue requirement from the Discos.”

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