NERC Considers Tariff Hike as Nigeria’s Electricity Subsidy Gulps N2.8tn in 8 Years

NERC Considers Tariff Hike as Nigeria’s Electricity Subsidy Gulps N2.8tn in 8 Years

  • NERC report shows that government spending on subsidy reached N2.8 trillion between 2015 and 2022
  • The recent rate hike has made the commission save N1 trillion in subsidy to power firms
  • In the first four months of 2023, N57 billion went into electricity subsidy payments

A report by the Nigerian Electricity Regulatory Commission has shown that government spending on electricity subsidy has reached N2.8 trillion.

According to the commission, subsidy paid by the Federal Government between 2015 and 2022 rose to N2.8tn in December last year.

NERC, electricity tariff
Electricity subsidy hits N2.8tn as NERC mulls tariff hike to stabilize power sector finances
Photo credit – EKEDC
Source: Getty Images earlier reported that Nigerians are bracing up for potential hike as 11 discos seek review of electricity tariff.

This was a follow-up on the announcement made by some power distribution companies in June, notifying Nigerians of the projected hike to take effect from July 1, 2023.

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According to Punch, the new report on ‘Overview of the Nigeria Electricity Supply Industry’ also shows that the government has been able to save N1 trillion in subsidy to power firms as a result of the past hikes in electricity tariffs.

A breakdown of electricity subsidy payments by FG

According to the commission electricity tariff increased from 55% of cost recovery to 94% between January 2020 and January 2023.

It noted that subsidies payable by the government would have grown to about N1 trillion per annum by 2023 if the tariff review in 2019 didn’t commence, adding that Service-Based Tariff was instrumental in the transition to cost-reflective levels.

Between January and April of this year alone, NERC said N57 billion was spent on electricity subsidy. It added that the Service-Based Tariff scheme help in reducing the amount spent by the government on power subsidies.

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It stated:

Annual subsidy reduced from N528bn in 2019 to N144bn in 2022. Subsidy in 2023 year-to-date (January to April 2023) stood at N57 billion. Service-Based Tariff was instrumental to the reduction of tariff subsidy. The financial burden of tariff subsidies between 2015 and 2022 stood at NGN2.8tn.

Discos threaten to increase tariff from July 1, 2023

Electricity Distribution Companies, according to multiple reports said Nigerians will pay more for electricity from July 1, 2023, had earlier reported.

The companies cited that the fluctuation in the exchange rate affects the tariff, causing it to increase.

Meanwhile, it was also reported that the number of electricity customers also increased in spite of the plans by government to raise the tariff.



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