The Nigerian Electricity Regulatory Commission (NERC) has revealed in its Q2 report that the federal government paid a total of N171.25 billion as electricity subsidy in the first half of 2023. The subsidy was attributed to the absence of cost-reflective tariffs across all distribution companies (DisCos).
The report indicates that during the first half of the year, N36.02 billion was incurred in the first quarter (Q1), and N135.23 billion in Q2. The increase in Q2 was primarily linked to the government’s policy of harmonizing exchange rates.
According to NERC, the government incurs a subsidy obligation due to the gap between cost-reflective and allowed tariffs. This funding is applied to the Nigerian Bulk Electricity Trading (NBET) invoices to be paid by DisCos. The subsidy obligation for Q2 2023 was N135.23 billion, representing a 275% increase compared to the N36.02 billion incurred in Q1 2023.
The report highlighted that, on average, the subsidy obligation incurred by the government per month in Q2 2023 was N45.08 billion. This subsidy obligation meant that in Q2 2023, DisCos were expected to cover only 53.25% of the total invoice received from NBET.
In terms of DisCos’ financial performance, the report indicated that their revenue for Q2 stood at N267.86 billion, achieving a 75.5% collection efficiency. This is an improvement from the 68.75% collection efficiency recorded in Q1. The total revenue collected by all DisCos in Q2 was N267.86 billion out of the N354.61 billion billed to customers, translating to a collection efficiency of 75.54%.
Top-performing DisCos in terms of collection efficiency were Kaduna, Ikeja, and Enugu, showing increases in collection efficiency from Q1 to Q2. Yola DisCo recorded a decrease in collection efficiency from 45.71% to 45.27% in the same period.
