NERC warns FG’s electricity subsidy could reach N2.4 trn year-end

According to the Nigerian Electricity Regulatory Commission (NERC), the total amount of electricity subsidies might reach N2.4 trillion by 2024.

At the PricewaterhouseCoopers (PwC) annual power and utilities roundtable in Lagos on Thursday, Yusuf Alli, the NERC’s commissioner of planning, research, and strategy, gave a speech.
According to Alli, changes in tariffs and difficulties with foreign currencies caused the subsidy to fluctuate.

“The monthly electricity subsidy was N1.9 trillion as of November, but based on current trends, it is anticipated to reach N260 billion in December,” he stated.

“It was reduced by more than N100 billion when the action was taken in April to increase the tariff for band A,” he said.

However, the macroeconomic environment has regrettably regressed to some extent.

As of right now, our best estimate for 2024 is that the total amount of subsidies will be N2.4 trillion.

Since the generating businesses are currently the ones who are not receiving their full payment due to the deficits, it is implied that the federal government, Ministry of Finance, would need to find the funds to pay them.

According to the NERC’s Q2 2024 quarterly report, the federal government’s obligation to pay power subsidies was N380 billion, a 40% decrease from the N633.3 billion spent in Q1 2024.

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In an effort to lower the amount of money the federal government spends on power subsidies, the commission authorized an increase in electricity rates for Band A consumers on April 3.

Customers who fall under this category and receive 20 hours of power supply every day will now pay N225 per kilowatt (kW), up from N66, according to the agency.

According to the NERC, the agreed pricing would result in a about N1.14 trillion reduction in power subsidies for the fiscal year 2024.