Nigeria Expends N375.8 Billion on Electricity Subsidies in Nine Months - The Top Society

Nigeria Expends N375.8 Billion on Electricity Subsidies in Nine Months

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The federal government of Nigeria has spent N375.8 billion on electricity subsidies in the first nine months of this year, while power consumers paid a total of N782.6 billion for electricity during the same period, according to reports from the Nigerian Electricity Regulatory Commission (NERC).
The disclosure was made in the first, second, and third quarterly reports of 2023 released by the NERC. Power distribution companies billed electricity users a nationwide total of N1.06 trillion during the nine months, out of which they collected N782.6 billion.
The NERC explained that the subsidy was necessary due to the absence of cost-reflective tariffs. In its third-quarter 2023 report, the regulatory body stated, It said, “In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff shortfall funding. This funding is applied to the NBET (Nigerian Bulk Electricity Trading Company) invoices that are to be paid by Discos.
Electricity

“The amount to be covered by the Disco is based on the tariff that they are allowed to charge and set out as their Minimum Remittance Obligation in the periodic Tariff Orders issued by the Commission.

“It is important to note that due to the absence of cost-reflective tariffs across all Discos, the government incurred a subsidy obligation of N204.59 billion in 2023/Q3 (average of N68.20bn per month), which is an increase of N69.37 billion (+51.3 per cent) compared to the N135.23 billion (average of N45.08 billion per month) incurred in 2023/Q2; this increase is largely attributable to the government’s policy to harmonise exchange rates.

“The rise in the government’s subsidy obligation meant that in 2023/Q3, Discos were only expected to cover 45 per cent of the total invoice received from NBET. For ease of subsidy administration, the MRO is limited to NBET only with the MO (Market Operator) being allowed to recover 100 per cent of its revenue requirement from the Discos.”

This funding is applied to the Nigerian Bulk Electricity Trading Company (NBET) invoices to be paid by Distribution Companies (Discos). The amount covered by the Discos is based on the tariff allowed and set out as their Minimum Remittance Obligation in periodic Tariff Orders issued by the Commission.
The NERC emphasized that the electricity subsidy obligation for the government in 2023/Q3 amounted to N204.59 billion, reflecting an increase of N69.37 billion (+51.3 per cent) compared to the N135.23 billion incurred in 2023/Q2. The rise was largely attributed to the government’s policy to harmonize exchange rates.
During the first, second, and third quarters of 2023, consumers paid N247.09 billion, N267.86 billion, and N267.61 billion, respectively, totaling N782.56 billion. Meanwhile, the electricity bills from Discos to consumers for the same periods were N349.55 billion, N354.61 billion, and N359.38 billion, amounting to a total of N1.06 trillion for the nine months.
The subsidy administration is aimed at mitigating the impact of non-cost-reflective tariffs, with the government covering the funding gap to ensure a stable power supply. The NERC continues to monitor and regulate the electricity sector to strike a balance between sustainability and affordability for both consumers and the government.
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