- The Nigerian Electricity Regulatory Commission (NERC) predicted the cumulative electricity subsidy in Nigeria could reach N2.4 trillion in 2024
- Tariff hikes in April for Band A customers helped reduce subsidy costs by over N100 billion
- The federal government may need to secure additional funding to cover shortfalls in payments to generating companies
The Nigerian Electricity Regulatory Commission (NERC) has stated that the cumulative electricity subsidy for 2024 could surge to N2.4 trillion.
This was disclosed by Yusuf Ali, NERC's commissioner for planning, research, and strategy, who spoke at the PwC annual power and utilities roundtable in Lagos on Thursday, November 28.
NERC warns of N260 billion monthly electricity subsidy in December
“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,” Ali stated.
Ali explained that fluctuations in the subsidy were caused by difficulties with foreign exchange and the periodic adjustment of tariffs.
“When the action was taken in April to increase tariff for band A, that reduced it by over N100 billion,” Ali stated.
Speaking further, Ali 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.”
Tariff increase helps cut electricity subsidy by 40% - NERC
In its Q2 2024 report, the NERC revealed that the federal government’s electricity subsidy obligation has dropped significantly by 40%, standing at N380 billion, compared to N633.3 billion in Q1 2024.
This decrease followed the commission’s approval in April of a tariff hike for customers in Band A, aimed at reducing subsidy costs. Under the new tariff, customers in Band A, who receive up to 20 hours of power supply daily, will now pay N225 per kilowatt-hour (kWh), up from the previous N66.
The NERC noted that the approved electricity tariff will help reduce the electricity subsidy burden by about N1.14 trillion in the 2024 fiscal year.
Federal Government plans major energy overhaul, aims for 20 hours of power by 2027
Meanwhile, TheRadar earlier reported that the Federal Government aimed for 20 hours of daily electricity by 2027, dependent on securing investment in oil and gas.
Olu Verheijen emphasised the need for investment to meet power goals amid Nigeria's national grid breakdowns.