Nigeria’s Electricity Subsidy Hits ₦1.91 Trillion in 11 Months

The Federal Government’s electricity subsidy expenditure has skyrocketed to ₦1.91 trillion in the first 11 months of 2024, according to a recent report by the Nigerian Electricity Regulatory Commission (NERC).

The report also revealed that electricity distribution companies (Discos) collected ₦1.23 trillion in revenue between January and September 2024, surpassing the ₦1.08 trillion collected in 2023.

Subsidy Breakdown

An analysis of NERC’s monthly supplementary orders highlighted a consistent rise in subsidy spending despite eliminating subsidies for Band A customers. The ₦1.91 trillion incurred from January to November 2024 marks a 204.15% increase from ₦628.61 billion in 2023.

• Q1 2024: ₦633.30 billion
• Q2 2024: ₦380 billion
• Q3 2024: ₦518.55 billion (a 36.46% increase from Q2)
• October–November 2024: ₦380.06 billion, even amid frequent national grid collapses.

Despite removing Band A subsidies, which raised tariffs above ₦200/kWh, the Federal Government continues to cover the gap between cost-reflective tariffs and the actual end-user rates through subsidies.

Rising Generation Costs and Government Commitment

The cost of power generation surged from ₦63.8/kWh in January to ₦117.27/kWh in November 2024. According to Power Minister Chief Adebayo Adelabu, this increase has further strained the government’s budget, which allocated ₦2.9 trillion to subsidize the power sector in 2024. Subsidies now primarily cover generation costs payable to the Nigerian Bulk Electricity Trading Plc (NBET) by Discos.

The government’s policy aims to transition to cost-reflective tariffs while shielding less-privileged consumers. However, concerns remain as subsidies for Bands B to E accumulate due to non-payment by the government, as noted by Sunday Oduntan, Executive Director of the Association of Nigerian Electricity Distributors.

Improved Revenue Collection by Discos

Despite subsidy challenges, Discos recorded significant revenue growth in 2024, collecting ₦1.23 trillion between January and September, achieving a 79.34% collection efficiency. Monthly revenues showed steady improvement:

• January: ₦95 billion (₦130.92 billion billed)
• June: ₦150.86 billion (₦176.57 billion billed)
• September: ₦171.58 billion (₦225.80 billion billed).

With this trajectory, 2024’s revenue collections are set to surpass previous years, including ₦526.8 billion in 2020, ₦761.2 billion in 2021, ₦828.1 billion in 2022, and ₦1.1 trillion in 2023.

While electricity revenue collection is on the rise, the increasing subsidy obligations and higher generation costs pose significant financial challenges for the Federal Government, underscoring the urgent need for a sustainable tariff system.