The Nigerian Electricity Regulatory Commission (NERC) has disclosed that the federal government incurred N380 billion in electricity subsidy costs during the second quarter of 2024.
This represents a reduction of N253.24 billion, or 40 percent, compared to the N633.3 billion subsidy recorded in the first quarter.
According to NERC’s quarterly report released on Friday, the decline in subsidy expenditure is linked to the tariff hike for Band A customers in April.
The report highlighted that because there are no cost-reflective tariffs across all electricity distribution companies (DisCos), the government had to cover the difference, resulting in a subsidy obligation of N380.06 billion, which accounts for 52.51 percent of the total invoice from the Nigerian Bulk Electricity Trading (NBET).
Read also: FG, NERC at odds over electricity tariff subsidy for hospitals
The report further noted a sharp reduction in the government’s subsidy obligation, dropping from N633.30 billion in Q1 (90.57 percent of the total Generation Companies’ invoice) to N380.06 billion in Q2 (52.51 percent of the total GenCo invoice).
The significant reduction was attributed to the government’s directive to adjust tariffs for Band A customers while maintaining the current rates for Band B to E customers since December 2022.
The commission explained that, in the absence of cost-reflective tariffs, the government must bridge the gap between the actual cost and the permitted tariff by providing subsidies.
For administrative purposes, the subsidy is applied to cover generation costs at the point of payment from DisCos to NBET, known as the DisCo’s Remittance Obligation (DRO).
On April 3, NERC approved a tariff increase for Band A customers, who typically receive 20 hours of electricity per day. Their rate rose from N66 to N225 per kilowatt-hour (kWh), with the aim of reducing the federal government’s electricity subsidy burden by about N1.14 trillion for the 2024 fiscal year.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
