FG incurs ₦380bn electricity subsidy bill in Q2 2024 – NERC
The Federal Government of Nigeria incurred an electricity subsidy bill of ₦380 billion in the second quarter of 2024, according to a report from the Nigerian Electricity Regulatory Commission (NERC) released on Friday. This figure reflects a 40% decrease compared to the first quarter’s subsidy of ₦633.3 billion, dropping to ₦253.24 billion in Q2.
The report explained that this subsidy was necessary due to non-cost-reflective tariffs, which prevent distribution companies (DisCos) from covering the total generation costs through customer payments. As a result, the government has been covering the gap. NERC noted that the Q2 subsidy constituted 52.51% of the total generation costs invoiced by NBET (Nigerian Bulk Electricity Trading Plc) to the DisCos, amounting to an average monthly subsidy of ₦126.69 billion.
The reduction in subsidy spending is attributed to a recent policy change by the government, which led to a tariff adjustment for Band A customers while freezing tariffs for Bands B through E at December 2022 rates. This move aligns with the government’s efforts to gradually reduce its financial burden while aiming to transition towards cost-reflective tariffs across all customer bands.
NERC emphasized that, to streamline the process, these subsidies directly cover the generation costs paid to NBET on behalf of the DisCos. Without these subsidies, the cost gap would continue to create challenges, underscoring the need for sustainable tariff reforms to improve the financial health of Nigeria’s electricity sector.
Written by Sakinat Musa Abubakar, Editor at Neptune Prime
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