FG To Pay N1.6trn Electricity Subsidy In 2024 As NERC Approves New Tariffs

From Lateef Taiwo

The federal government may be expending N1.6 trillion on electricity subsidy in 2024 as the Nigerian Electricity Regulatory Commission (NERC) reviews existing tariffs to avert adverse impact of additional charges on consumers.

This was disclosed Wednesday by the Chairman of the Nigerian Electricity Regulatory Commission (NERC), Engr Sanusi Garba, while speaking during a media parley with power correspondents
in Abuja to herald the new tariff regime approved by the regulator.

NERC on Wednesday night posted the reviewed tariffs on its website for the operating electricity distribution companies (DisCos) with subsidy provisions.

Going by the NERC boss’ word, the projected subsidy would gulp about N333 billion per month.

Garba who spoke passionately about the latest review said: “I want to correct the impression that for one year we haven’t had any review. The reality is that the reviews have been done but what happened is what you pay as a customer is a blend of regulation and and policy.

“If we have determined that you should be paying N150 and the federal government says you should pay N60 so that it pays the difference, then that is what it is; the government would now provide the money.

“And that is why in the current tariff order that is posted on our website, you will see this is what you should pay, and what the government says you should pay. And the government will provide for the difference except there is a change of the government policy.

“For the first time we mandated all the Discos to provide five-year capital investment plans, and we reviewed it for prudence and efficiency, and we made sure that all these investments are targeted at improving services.

“We have our projection on what will be required if the government does nothing tariff, and it will be N1.6trn to fund electricity, and that is 30bn a month. One of the new things in tariff order is, and to avoid rate shock, we will now be doing the minor tariff review very frequently, like every month’’.

Analysis of the order according to DisCos showed that the government will in 2024 pay N233.26 billion (or N19.44 billion monthly) as subsidies for consumers under the Abuja Electricity Distribution Company, AEDC, franchise. NERC stated that AEDC had applied for N151.07 as cost reflective tariff per kilowatt hour but the Commission approved N120.88/kWh. With the tariff freeze, consumers would be charged only N63.24/kWh while the government will pay N58.12/kWh.

For electricity consumers served by Ikeja Electric, the government will pay N238.20 billion (or 19.85 billion monthly) as subsidies in 2024. IKEDC had for N128.18/kWh as cost reflective tariff, the Commission approved N112.10/kWh. With the tariff freeze, consumers will be charged only N56.60/kWh while the government will pay N55.50/kWh as subsidy.

Benin DisCo, the Commission said consumers will enjoy a cumulative subsidy of N140.85 billion (or N11.74 billion monthly). The utility had applied for an astronomical N277.70/kWh as cost reflective but got approval of N126/kWh from the regulator. The new policy means consumers will pay N60.10/kWh while the government will pay N65.90/kWh as subsidy.

The NERC Chairman explained while speaking to the journalists that though the new Multi-Year Tariff Order 2024 has approved increases in rates, the intervention of the federal government means consumers will not be paying higher price for electricity.

“For the first time, we have published what each DisCo should charge and we have also published the amount they are allowed to charge based on government policy because the government has decided to in the meantime continue to pay subsidies.

“If you check the order, you will see that tariffs are not going up but you will see what the DisCos should have been charging and you can also see in the tariff order the amount of subsidies the government will be paying to cover the gap,” Engr Garba explained.


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