- The Nigerian government’s electricity subsidy spending has reached N1.91 trillion in the first 11 months of 2024, marking a 204% increase from last year.
- Electricity distribution companies collected N1.23 trillion in revenue between January and September 2024, surpassing the previous year’s total.
Nigerian government’s monthly spending on electricity subsidies has surged to N1.91 trillion in the first 11 months of 2024, according to a report from the Nigerian Electricity Regulatory Commission (NERC). The report highlights that, despite efforts to reduce subsidy obligations by eliminating subsidies for Band A customers, the overall subsidy amount has continued to rise each quarter throughout the year.
Between January and November 2024, the government spent N1.283 trillion more on subsidies than in 2023, marking a 204.15% increase from N628.61 billion last year. The subsidy costs were N633.30 billion in the first quarter of 2024, decreasing to N380 billion in the second quarter. However, subsidy expenses rose by 36.46% in the third quarter to N518.55 billion. The subsidy remained at N380.06 billion by October and November despite ongoing issues such as national grid collapses.
NERC’s decision to cut off subsidies for Band A customers, starting April 3, 2024, aimed to reduce subsidy payments and raise tariffs for those customers to above N200 per kilowatt-hour, up from N68. This move was intended to bridge the gap between cost-reflective tariffs and the allowed tariff, which the government has been subsidising.
Minister of Power, Chief Adebayo Adelabu, previously stated that the government would provide N2.9 trillion in subsidies to the power sector in 2024, even without raising electricity tariffs. The subsidy is applied to the generation cost billed to the distribution companies (Discos) by the Nigerian Bulk Electricity Trading (NBET) company, helping to cover the difference between the actual generation costs and what Discos are allowed to charge consumers.
Despite the subsidy efforts, generation costs have risen sharply, from N63.8 per kilowatt-hour in January 2024 to N117.27 per kilowatt-hour by November, leading to higher government expenditure. In November alone, generation costs amounted to N67.095 billion, but Discos could only recover N39.24 billion.
The report also reveals that electricity distribution companies saw a significant increase in their revenue generation, collecting N1.23 trillion between January and September 2024, surpassing the N1.08 trillion total for 2023. However, the companies could collect only 79.34% of the billed amount during this period.
Discos billed N1.548 trillion during the nine months but collected N1.228 trillion. The monthly collections showed steady growth, with N95 billion generated in January, N97 billion in February, and N100.44 billion in March. Revenue continued to rise through the months, reaching N225.80 billion in September, with N171.58 billion collected.
The situation has raised concerns among industry experts. Sunday Oduntan, Executive Director of Research and Advocacy for the Association of Nigerian Electricity Distributors, pointed out that while Band A customers pay the actual cost of electricity, about 67% of the cost for customers in Bands B, C, D, and E is still subsidised by the government. He added that the government has failed to cover these subsidy shortfalls, leaving a growing gap.