- The Nigerian government paid N199 billion in electricity subsidies for December 2024, a sharp increase of N194.26 billion from November.
- Tariffs for Bands B to E remain frozen at 2022 rates, with the government covering N29.10 billion for Abuja DisCo and N26.68 billion for Ikeja Electric.
- Rising exchange rates, inflation at 33.9%, and adjustments in power generation capacity drove the surge in subsidy costs.
The Nigerian Electricity Regulatory Commission (NERC) announced that the federal government paid N199 billion in electricity subsidies for December 2024. This amount marks a significant rise, increasing by N194.26 billion from November 2024.
NERC released this information in its December 2024 Multi-Year Tariff Order (MYTO) report, published on its website.
The report shows that Band-A customers continued to pay N209 per kilowatt-hour (kWh), while tariffs for Bands B to E stayed fixed at 2022 rates. The government plans to spend N29.10 billion to subsidise customers under the Abuja Electricity Distribution Company (DisCo) and N26.68 billion for those under Ikeja Electric.
Several factors contributed to the sharp rise in subsidies, including an increase in the exchange rate, now pegged at N1,687.45 per dollar, inflation hitting 33.9%, and adjustments in available power generation capacity. These economic challenges have raised electricity production costs, pushing the government to maintain affordable consumer tariffs.
Despite these pressures, NERC determined that the benchmark price of gas-to-power is $2.42 per MMBTU, which the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) also determined.
NERC’s report also points out that electricity tariffs are reviewed monthly. The government bases these adjustments on key economic indicators, such as inflation, exchange rates, and gas-to-power prices. These reviews help align tariffs with market realities while keeping electricity affordable for consumers.
The government’s ongoing subsidy payments aim to reduce Nigerians’ financial burden. However, the rising costs of these subsidies pose a challenge as economic conditions worsen. The surge in exchange rates and inflation has strained government finances, making subsidy payments more expensive.
Consumers in Bands B to E have continued paying frozen tariffs since December 2022. NERC’s decision to keep these rates fixed protects many Nigerians from the full impact of rising electricity costs. However, the government covers the gap between the actual cost of electricity and the lower, fixed tariffs.
As Nigeria faces economic difficulties, the government grapples with a difficult task. It must maintain subsidies to keep electricity affordable while managing rising costs due to inflation and a weakening exchange rate.
NERC’s report highlights the complexities of Nigeria’s power sector, pointing to ongoing challenges in regulating tariffs amidst economic pressures. Government subsidies remain crucial in keeping electricity accessible to many Nigerians. However, the long-term sustainability of this strategy remains a significant concern.
Consumers should expect adjustments in the months ahead, with tariffs subject to monthly reviews. The government remains committed to shielding consumers from drastic increases while managing the growing subsidy burden.