BY Busola Aro
Nigerian Electricity Regulatory Commission (NERC) says the federal government incurred an electricity subsidy obligation of N380 billion in the second quarter (Q2) of 2024.
The NERC, in its quarterly report released on Friday, said the electricity subsidy bill dropped by N253.24 billion (40 percent) from N633.3 billion recorded in Q1.
The drop, according to the commission, was due to the upward review of tariff for Band A customers in April.
“It is important to note that due to the absence of cost-reflective tariffs across all DisCos, the Government incurred a subsidy obligation of ₦380.06 billion (52.51% of total NBET invoice) in 2024/Q2 (average of ₦126.69 billion per month),” NERC said.
“Between 2024/Q1 and 2024/Q2, the subsidy obligation of the government reduced by – ₦253.24 billion, from ₦633.30 billion (90.57% of total GenCo invoice) to ₦380.06 billion (52.51% of total GenCo invoice).
“The significant decrease in the subsidy obligation of the FGN is a result of the policy directive of the Government to implement reviews of tariffs charged to Band A customers while the tariffs for Band B-E customers remain frozen at the rates payable since December 2022.”
The NERC said in the absence of cost-reflective tariff, the government covers the resultant gap (between the cost-reflective and allowed tariff) in the form of subsidies.
The commission said for ease of administration, the subsidy is only applied to the generation cost payable by DisCos to NBET at source in the form of a DisCo’s Remittance Obligation (DRO).
On April 3, NERC approved an increase in electricity tariff for customers under the Band A classification.
The commission said customers under the classification, who receive 20 hours of daily power supply, will pay N225 per kilowatt (kW) — up from N66.
Following the development, the agency said the approved tariff would reduce electricity subsidy for the 2024 fiscal year by about N1.14 trillion.
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