Here is how electricity subsidies gulped N6trn in ten years

Nigeria’s electricity sector has been haemorrhaging funds for over a decade, with N6 trillion gulped down by subsidies in the past ten years.

Data from the Nigeria Electricity Regulatory Commission (NERC) revealed that the government paid N645 billion in 2023 from N225 billion in 2015 for subsidies, signalling a spike of 186.7 percent.

The electricity subsidy increased to N267 billion in just the first two months of this year.

Findings showed the federal government would pay N1.67 trillion as electricity subsidy in 2024, even though the Nigerian Bulk Electricity Trading Plc budget only showed a subsidy plan of N450 billion.

The 2024 electricity subsidy is 170 percent higher than the N619 billion reportedly paid last year, according to findings by BusinessDay.

Further breakdown showed the customers of Ikeja DisCo will benefit the most from the plan, with around N238 billion earmarked as subsidies, up from N77.41 billion reportedly paid in 2023. This is closely followed by the Abuja Electricity Distribution Company (AEDC), which is projected to receive around N233 billion as an electricity subsidy.

Yola Electricity DisCo has the least amount of subsidy, with N64.48 billion earmarked as opposed to N45.95 billion reportedly paid as subsidy in 2023.

Analysts said the problem with that plan is not only its lack of viability but also that it may be the starting point for another expensive subsidy.

“The rich, accounting for only 20 percent of electricity consumers, are reaping more significant rewards from subsidies than the intended beneficiaries,” said Adetayo Adegbemle, convener and executive director of PowerUp Nigeria, a power consumer advocacy group.

He said the electricity subsidy in Nigeria has become a financial burden that “is no longer sustainable”.

“Urgent action is needed to address the disparities in subsidy distribution, prevent further strain on government finances, and redirect resources to areas where they can have a more significant impact,” he added.

Adeola Adenikinju, a professor of energy economics and president of the Nigerian Economic Society, said the introduction of the N1.67 trillion electricity subsidy won’t solve the challenges in the power sector.

“The Central Bank of Nigeria and the federal government had poured trillions naira into the power sector with little or nothing to show for it; so I don’t see the N1.67 trillion electricity subsidy solving access to electricity; rather, it will worsen the government’s fiscal balance,” he said.

According to him, some of the long-term solutions include addressing the issues of technical losses and implementation of market-driven tariffs.

“Otherwise, all investment will be wasted,” Adenikinju added.