FG incurred N464bn electricity subsidy bill in Q3 2024, up by 52% – NERC

The Nigerian Electricity Regulatory Commission (NERC) says the federal government incurred an electricity subsidy obligation of N464.12 billion in the third quarter (Q3) of 2024.

In its quarterly report on December 20, NERC said the electricity subsidy bill increased by N84 billion (52.51 percent) from N380 billion recorded in Q2.

NERC said in the absence of cost-reflective tariff, the government covers the resultant gap (between the cost-reflective and allowed tariff) in the form of subsidy.

“It is important to note that due to the absence of cost-reflective tariffs across all DisCos, the government incurred a subsidy obligation of N464.12 billion13 (54.71% of total NBET invoice) in 2024/Q3,” the statement  reads.

“Between 2024/Q2 and 2024/Q3, the subsidy obligation of the government increased by +₦84.06 billion, from ₦380.06 billion (52.51% of total GenCo invoice) to ₦464.12 billion (54.71% of total GenCo invoice). 

“The increase in the subsidy obligation of the FGN is a result of the FGN policy to freeze allowed tariffs paid by customers despite the increase in the cost-reflective tariffs.”

The commission said for ease of administration, the subsidy is only applied to the generation cost payable by DisCos to NBET at source in the form of a DisCo’s remittance obligation (DRO). 

On April 3, NERC approved an increase in electricity tariff for customers under the Band A classification.

The commission said customers under the classification, who receive 20 hours of daily power supply, will pay N225 per kilowatt (kW) — up from N66.

However, the tariff for Band B, C, D, and E remained unchanged.

Following the development, the agency said the approved tariff would reduce electricity subsidy for the 2024 fiscal year by about N1.14 trillion.

One month later, DisCos announced a reduction in the tariff of customers under the Band A classification to N206.80 per kilowatt-hour.