FG to spend N2.4trn on electricity subsidy by 2024

The federal government is expected to spend N2.4 trillion on electricity subsidies by the end of 2024, indicating a 293 percent increase from the N610 billion spent last year.

Yusuf Ali, commissioner for planning, research, and strategy at the Nigerian Electricity Regulatory Commission (NERC) pinned the sharp increase on the macroeconomic environment of Nigeria.

He made this known Thursday at the PwC’s Annual Power and Utilities Roundtable themed “Reigniting hope in Nigeria’s electric power sector” in Lagos.

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“Action was taken in April to increase tariff for band A to reduce subsidy by like over 100 billion but unfortunately, there has been some level of backsliding in the macroeconomic environment, which has meant that the allowed tariff hasn’t moved, but the cost is reflective going up.

“And as long as that happens, the subsidy will only continue to increase. So right now, the best estimate that we have for 2024 is that the cumulative subsidy for the year will be 2.4 trillion,” he added.

The Commission’s recent report, published on Sunday, indicated that the federal government had already incurred N1.91 trillion in electricity subsidy obligations in the first 11 months of the year.

The report also highlighted improved revenue collection by power distribution companies (DisCos), which recorded N1.23 trillion in revenue between January and September 2024, surpassing the N1.08 trillion collected in the entire year of 2023.

“Even though we are complaining that the cost of power is too high, we’ve learned that we are barely covering the cost of generating power. So that means even from Band A, the DisCos are not making money,” Pedro Omontuemhen, Partner and Energy, Utilities & Resources Leader at PwC’s West Market Area, said.

“I’m a strong advocate for subsidy in the power sector because I see that kind of subsidy reaches the Nigerians directly. But what I heard today is a revelation, even when we are thinking that there’s no subsidy, there’s still a lot of subsidy,” he added.

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Data from NERC’s monthly supplementary order, posted on its website on Sunday, revealed a consistent quarterly increase in subsidy expenses throughout the year, even after subsidies for Band A customers were removed.

Between January and November 2024, subsidy costs rose by 204.15 percent, or N1.283 trillion, compared to the N628.61 billion recorded for the same period in 2023.

A quarterly breakdown showed that N633.30 billion was spent on electricity subsidies in the first three months of 2024.

This figure dropped to N380 billion in the second quarter but surged by 36.46 percent to N518.55 billion in the third quarter. Despite repeated national grid collapses in October and November, subsidy expenses remained substantial, totaling N380.06 billion for the two months.