- NERC argued that the electricity subsidy is due to the absence of cost-reflective tariffs.
- Power consumers paid N782.6 billion for the commodity during the same period.
The Federal Government spent N375.8 billion on electricity subsidies in the first, second and third quarters of 2023. According to the Nigerian Electricity Regulatory Commission (NERC), electricity consumers paid N782.56 billion for the commodity between January and September (N247.09 billion, N267.86 billion and N267.61 billion in the first, second and third quarters of 2023, respectively).
During the period under review, the power distribution companies billed electricity users a total of N1.06 trillion nationwide but collected N782.56 billion despite the blackouts in many parts of Nigeria. On subsidy payments, the Federal Government subsidised power by N36 billion in the first quarter of this year. This increased to N135.2 billion in the second quarter and rose to N204.6 billion in the third quarter. NERC argued that the subsidy is due to the absence of cost-reflective tariffs.
NERC, in its latest third quarter 2023 report, stated, “It is important to note that due to the absence of cost-reflective tariffs across all DisCos, the government incurred ₦204.59 billion in 2023/Q3 (average of ₦68.20 billion per month), which is an increase of ₦69.37 billion (+51.30%) compared to the ₦135.23 billion (average of ₦45.08 billion per month) incurred in 2023/Q2; this increase is largely attributable to the government’s policy e change rates. The rise in the government’s subsidy obligation meant that in 2023/Q3, DisCos were only expected to cover 45.00% of the total invoice received from Nigerian Bulk Electricity Trading Company (NBET).”
“In the absence of cost-reflective tariffs, the government undertakes the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff shortfall funding. This funding is applied to the NBET invoices that are to be paid by Discos. The amount to be covered by the Disco is based on the tariff they are allowed to charge and set out as their Minimum Remittance Obligation in the periodic Tariff Orders issued by the commission.
“We are more concerned about the transparent process of what constitutes the subsidy and the tariff regime. If we had a transparent process, we would do a cost-benefit analysis, and all the stakeholders would know how to ensure everybody is carried along fairly and equitably,” it added. Furthermore, on remittance by special and cross-border customers in 2023/Q3, NERC stated that none of the four international customers being supplied by Nigeria’s power generation companies in the sector made any payment against the cumulative invoice of $11.16 million issued to them by the market operator for services rendered in 2023/Q3.