- Despite an increase in electricity tariffs, Nigeria’s annual electricity subsidy has surged to N2.4 trillion in 2024, up from N650 billion in 2023.
- Monthly revenue collections in the electricity sector have grown by 416%, from N31 billion in 2017 to N160 billion in 2024.
Despite the electricity tariff hike for the Band A service category, the Federal Government has seen a significant increase in electricity subsidies, with the annual subsidy rising sharply to N2.4 trillion in 2024, compared to N650 billion in 2023. This surge contrasts with the anticipated reduction in government subsidy spending, estimated to be N1.14 trillion when the tariff increase was first introduced.
This update was shared by Dr Yusuf Ali, Commissioner for Planning, Research, and Strategy at the Nigerian Electricity Regulatory Commission (NERC), during a presentation at PwC’s Annual Power and Utilities Roundtable in Lagos. Speaking on the theme “Reigniting Hope in Nigeria’s Electric Power Sector,” Dr Ali noted that without tariff reforms implemented between 2020 and 2023, the subsidies would have increased even more, particularly amid the macroeconomic challenges over the past 20 months.
Dr. Ali explained that between 2023 and 2024, the depreciation of the local currency and other macroeconomic factors caused cost-reflective tariffs to rise by 118%, while subsidies increased by 270%. Although the April tariff hike for Band A was intended to reduce government subsidy obligations, the country’s difficult macroeconomic conditions have negated this effort.
He projected that the total subsidy 2024 will reach N2.4 trillion, with the subsidy for December 2024 estimated to be approximately N260 billion, up from N202 billion the previous month. Additionally, Dr Ali highlighted a significant improvement in monthly revenue collections within the electricity sector, which has grown from N31 billion in July 2017 to N160 billion in July 2024.
This represents a 416% increase, driven by initiatives that improved payment discipline among Distribution Companies (DisCos). He credited introducing the Minimum Remittance Order/Discipline and Compliance Regime (MRO/DCR) for compelling DisCos to remit more collections to the market.
This has allowed for a more sustainable financial structure, with the permitted cost-reflective tariff for DisCos rising from ₦60/kWh in January 2020 to ₦123/kWh in April 2024, ensuring that DisCos could collect sufficient revenue to cover their operational costs.