Nigeria’s electricity subsidy obligation has escalated to ₦1.91 trillion in the first 11 months of 2024, according to a new report from the Nigerian Electricity Regulatory Commission (NERC).
The report reveals that despite efforts to reduce subsidy payments, including the removal of subsidies for Band A consumers, the overall subsidy burden continues to rise.
The report also highlighted a significant improvement in the revenue collection by power distribution companies (Discos), which totaled ₦1.23 trillion during the first nine months of 2024. This represents a notable increase from ₦1.08 trillion collected in the same period in 2023.
The data shows that electricity subsidies have increased quarterly throughout the year, with a 204.15% jump from ₦628.61 billion in 2023 to ₦1.28 trillion in 2024. In the first quarter alone, ₦633.30 billion was spent, with the amount reducing to ₦380 billion in the second quarter. However, the third quarter saw a sharp increase of 36.46%, with subsidies rising to ₦518.55 billion.
Despite the government’s move to remove subsidies for Band A customers in April 2024, the cost of electricity generation has been rising. Generation costs surged from ₦63.8 billion per kilowatt-hour in January 2024 to ₦117.27 billion in November 2024, leading to further government expenditure on subsidies. The government had committed to subsidizing the gap between cost-reflective tariffs and the actual consumer rates during the transition period.
The report also sheds light on the challenges facing the power sector, including the inability of the government to fulfill its promise to cover subsidy shortfalls for customers in Bands B to E. According to the Executive Director of Research and Advocacy for the Association of Nigerian Electricity Distributors (ANED), Sunday Oduntan, government payments to cover the shortfall have been inconsistent, and only customers in Band A are paying the true cost of electricity consumption.
On a positive note, revenue collections by the Discos have improved significantly, with a total of ₦1.23 trillion generated in the first three quarters of 2024, surpassing the previous year’s figures. This represents a collection efficiency of 79.34%, with ₦1.548 trillion billed and ₦1.228 trillion successfully collected.
The increase in revenue collections is driven by higher billing and improved payment patterns, with the Discos already exceeding their revenue for the whole of 2020 and on track to surpass the totals from 2021, 2022, and 2023 by the end of 2024.
