FG’s electricity subsidy surges to N2.4tr amidst tariff reforms – NERC

The Nigerian Electricity Regulatory Commission (NERC) has revealed that the Federal Government’s annual electricity subsidy surged to N2.4 trillion in 2024, a sharp rise from N650 billion in 2023.

The commission attributed the significant increase to persistent inefficiencies in the electricity sector, despite the introduction of the Band A tariff service category. The initiative, aimed at reducing the government’s subsidy burden, was estimated to save N1.14 trillion.

Commissioner for Planning, Research, and Strategy, NERC, Dr. Yusuf Ali, disclosed this in his presentation at the PwC’s Annual Power and Utilities Roundtable in Lagos, on Thursday.

He noted that between 2023 and 2024, macroeconomic shocks, primarily driven by foreign exchange fluctuations, caused cost-reflective tariffs to rise by 118 per cent, while annual subsidies surged by 270 per cent.

Dr. Ali stated that the tariff hike for Band A in April was intended to substantially cut the subsidy. However, the country’s challenging macroeconomic conditions have hindered this goal, causing the allowed tariff to remain unchanged while costs continue to reflect the increase.

He highlighted that without the tariff reforms introduced between 2020 and 2023, annual subsidies would have escalated sharply, particularly in light of the contractionary macroeconomic shocks experienced over the past 20 months.

“So right now, the best estimate that we have for 2024 is that the cumulative subsidy for the year will be 2.4 trillion” the NERC Commissioner for Planning, Research, and Strategy stated.