NERC: FG’s electricity subsidy spend may hit N2.4trn by year end

November 29, 2024 1:08 pm

L-R: Yusuf Ali, commissioner, planning research and strategy, NERC; Akin Olagbende, general counsel and chief compliance officer, Geregu Power; Pedro Omontuemhen, partner and energy utilities and resources leader, West Africa, PWC Nigeria, and Adedayo Olowoniyi, representative of the minister of power and chief technical adviser to the minister of power, at the PWC utilities roundtable in Lagos on November 28, 2024.

The Nigerian Electricity Regulatory Commission (NERC) says the cumulative electricity subsidy for 2024 may increase to N2.4 trillion.

Yusuf Alli, commissioner of planning, research, and strategy at the NERC, spoke on Thursday at the PricewaterhouseCoopers’ (PwC) annual power and utilities roundtable in Lagos.

Alli said the subsidy fluctuated due to challenges with foreign exchange and adjustments to tariffs.

“As of November, the subsidy amount stood at N1.9tn, but with current trends, the monthly subsidy for electricity is expected to reach N260bn in December,” he said.

“When the action was taken in April to increase tariff for band A, that reduced it by over N100 billion,” he said.

“But unfortunately, there has been some level of backsliding in the macroeconomic environment.

“So right now, the best estimate that we have for 2024 is that the cumulative subsidy for the year will be N2.4 trillion.

“The implication is that the federal government, Ministry of Finance, would have to find the money to pay the generating companies because they are the ones right now that are not getting their full money arising from the shortfalls.”

In its quarterly report for Q2 2024, the NERC said the federal government’s electricity subsidy obligation stood at N380 billion — a 40 percent drop from the N633.3 billion incurred in Q1 2024.

On April 3, the commission approved an increase in electricity tariff for customers under the Band A classification to reduce the amount the federal government spends on subsidising electricity.

The agency said customers under the classification, who receive 20 hours of daily power supply, will pay N225 per kilowatt (kW) — up from N66.

The NERC said the approved tariff would reduce electricity subsidy for the 2024 fiscal year by about N1.14 trillion.