The Federal Government has reportedly expended a total of N375.8 billion on electricity subsidy from January to September 2023, according to data obtained from the Nigerian Electricity Regulatory Commission (NERC). Simultaneously, power consumers paid N782.6 billion for electricity during the same period, despite challenges such as blackouts in various parts of Nigeria.
Throughout the nine months, power distribution companies (Discos) billed users a nationwide total of N1.06 trillion. However, they only managed to collect N782.6 billion, indicating a substantial shortfall in revenue.
The breakdown of subsidy payments reveals an upward trend, with the Federal Government subsidizing power by N36 billion in the first quarter, N135.2 billion in the second quarter, and N204.6 billion in the third quarter of 2023. The subsidy figures for the fourth quarter are not available as the period is still ongoing.
In its just-released third-quarter 2023 report, the NERC attributed the subsidy to the absence of cost-reflective tariffs. The report highlighted that the government covers the gap between cost-reflective and allowed tariffs through tariff shortfall funding, which is then applied to invoices from the Nigerian Bulk Electricity Trading Company (NBET) to be paid by Discos.
The NERC report indicated a subsidy obligation of N204.59 billion in the third quarter alone, marking a 51.3 percent increase compared to the second quarter. This increase was primarily attributed to the government’s policy to harmonize exchange rates.
Regarding the payment of electricity bills, consumers paid N247.09 billion, N267.86 billion, and N267.61 billion in the first, second, and third quarters of 2023, respectively, totaling N782.56 billion.
The NERC report highlighted an increase in collection efficiency to 76.56 percent in the third quarter, attributing it to various collection campaigns for improved remittance by post-paid customers.
However, on market remittance, the report revealed a decline in performance, with Discos collectively remitting N158.43 billion out of N208.7 billion payable, resulting in an outstanding balance of N50.27 billion. The remittance performance dropped to 75.91 percent in the third quarter, down from 95.21 percent recorded in the second quarter.
The NERC also noted that none of the international and bilateral customers made payments against cumulative invoices issued to them in the third quarter, raising concerns about revenue recovery.
President of the Electricity Consumers Association of Nigeria, Chijioke James, expressed skepticism about the transparency of the subsidy payment process, calling for more clarity and a transparent tariff regime for stakeholders to assess the government’s commitments.
*This information was provided by the NERC in its quarterly report released on December 15, 2023.*
