Elizabeth O.
Consumers Pay N783bn as Electricity Subsidy Reaches N376bn
In the same period, consumers paid a cumulative amount of N782.6bn for electricity services.
The figures reveal that the government subsidized electricity throughout the first, second, and third quarters of 2023.
Despite widespread blackouts experienced in various parts of Nigeria, power distribution companies managed to collect N782.6bn from consumers, out of the total nationwide billing of N1.06tn over the nine-month period.
The breakdown of subsidy payments shows that the government provided N36bn in the first quarter, which increased to N135.2bn in the second quarter, and further rose to N204.6bn in the third quarter. However, figures for the fourth quarter are currently unavailable as we are still within that period.
NERC’s just-released third-quarter report for 2023 explains that the subsidy is necessary due to the absence of cost-reflective tariffs. In the absence of such tariffs, the government bridges the gap between the cost-reflective and allowed tariff through tariff shortfall funding. This funding is utilized to cover the invoices issued by the Nigerian Bulk Electricity Trading Company (NBET), which are to be paid by the power distribution companies (Discos).
The amount to be covered by each Disco is determined by the tariff they are permitted to charge, as specified in their Minimum Remittance Obligation outlined in the periodic Tariff Orders from the Commission.
It’s important to note that due to the absence of cost-reflective tariffs across all Discos, the government’s subsidy obligation for 2023/Q3 amounted to N204.59bn (an average of N68.20bn per month).
This represents a significant increase of N69.37bn (+51.3 percent) compared to the N135.23bn incurred in 2023/Q2 (an average of N45.08bn per month).
The rise in subsidy can be largely attributed to the government’s policy of harmonizing exchange rates.
Consequently, in 2023/Q3, Discos were expected to cover only 45 percent of the total invoice received from NBET. For administrative convenience, the Minimum Remittance Obligation is limited to NBET, while the Market Operator (MO) is allowed to recover 100 percent of its revenue requirement from the Discos.
Regarding consumer payments, the quarterly reports from the power regulator indicate that consumers paid N247.09bn, N267.86bn, and N267.61bn during the first, second, and third quarters of 2023, respectively. This amounts to a total of N782.56bn paid by consumers.
Additionally, the reports reveal that the electricity bills issued by Discos to consumers during the three quarters were N349.55bn, N354.61bn, and N359.38bn, respectively. Consequently, the total billing for the nine-month period reached N1.06tn.
