States incur N199.1b electricity subsidies as NERC seeks plant privatisation

•Govt paying more to subsidize power for Abuja, Lagos residents

Nigeria has incurred over N199.1 billion electricity subsidy across eleven distribution companies (DisCos), which cover the 36 states and the Federal Capital Territory (FCT).

This comes as the Nigerian Electricity Regulatory Commission (NERC) has called for urgent privatisation of power plants under Niger Delta Power Holding Company (NDPHC).

The December 2024 Supplementary Order to the Multi-Year Tariff Order – 2024, released by NERC has shown that rural dwellers, who account for 70 per cent of the country’s population are being shortchanged in electricity subsidies as urban residents in Lagos alone enjoyed N48.7 billion and Abuja N29.1 billion subsidies in December.

With the continuation of electricity subsidy policy, freezing tariffs for Bands B to E customer categories at the rates set in December 2022, end-users across the band pushed the December subsidy to N199.1 billion.

Under the subsidy plan, the estimated monthly benefits for customers in under the
Abuja Electricity Distribution Company (AEDC) stands at about N29.1 billion. These covers people living in the FCT, Niger and parts of Nasarawa.

In Lagos, Nigerians under Eko Electricity Distribution Company (EKEDC) incurred N22.42 billion while those under Ikeja Electric (IE) incurred N26.68 billion in subsidies.

States under Port Harcourt Electricity Distribution Company (PHED), which are predominantly, South South states enjoyed N14.84 billion while those under Benin Electricity Distribution Company (BEDC) saw a subsidy of N16.46 billion.

Residents of South East under the Enugu Electricity Distribution Company (EEDC) witnessed N16.12 billion in subsidy while those in the north under Jos Electricity Distribution Company (JED) were got N12.77 billion subsidy.

Under Kaduna Electricity Distribution Company (KAEDC), the subsidy was N14.49 billion N8.63 billion under Yola Electricity Distribution Company (YEDC), Kano Electricity Distribution Company (KEDCO) witnessed N13.58 billion in subsidy and the urban residents under the Ibadan Electricity Distribution Company (IBEDC) enjoyed N24.55 billion.

While questions persists about the sustainability of subsidies and their impact on the long-term viability of the energy sector, energy experts have stressed the need for reforms in the power sector to reduce reliance on subsidies and improve efficiency.

Meanwhile, NERC, in its report that measures competition in the power sector post privatisation has urged for urgent conclusion on the privatisation of power plants under government owed NDPHC.

NERC had noted in the report that the average rate of electrification in urban centres of Nigeria stood at 82.2 per cent in 2023 while in rural households (which typically have lower incomes), average electrification rate stood at approximately 40 per cent even as the World Bank had estimated that 59.5 per cent of the distribution of the tariff subsidy goes to the richest 20 per cent of the households while only 1.5 per cent benefits the poorest 20 per cent which further deepens the access challenge.

Raising concerns over looming generation crisis, NERC insisted that there is a need to provide a clear subsidy financing plan to ensure full and timely settlement of invoices for energy generated by GenCos and gas supplied by GasCos thereby ensuring sustainable generation.
The regulator noted the need for provision of clear policy on gradual subsidy phase-out and path to cost-reflectivity to enhance bilateral transactions and improve the liquidity of the of the power sector.

It asked the government to prioritise the completion of the ongoing Federal ministries and agencies verification platform to ensure accurate billing and timely payment of MDA bills.

“There is an urgent need to fast-track the privatisation or improved management of the FGN-owned NDPHC plants and address the obstacle associated with gas supply and evacuation infrastructure to unlock stranded capacity. There is an urgent need to prioritize and finalise the ongoing procurement of the SCADA system by Transmission Company of Nigeria to enhance the reliability,” NERC stated.