The Nigerian Electricity Regulatory Commission (NERC) has reported that the federal government faced an electricity subsidy obligation of N380 billion in the second quarter (Q2) of 2024.
In its quarterly report released on Friday, NERC noted a significant drop in the subsidy bill, which decreased by 40% to N253.24 billion in Q2, down from N633.3 billion in the first quarter (Q1).
The report stated, “Due to the absence of cost-reflective tariffs across all Distribution Companies (DisCos), the government incurred a subsidy obligation of ₦380.06 billion (52.51% of the total NBET invoice) in Q2 2024, averaging ₦126.69 billion per month.”
Comparing Q1 to Q2, the government’s subsidy obligation reduced by ₦253.24 billion, from ₦633.30 billion (90.57% of the total GenCo invoice) to ₦380.06 billion (52.51% of the total GenCo invoice).
NERC attributed the decrease in the subsidy to a government policy directive to review tariffs for Band A customers, while tariffs for Bands B-E have remained unchanged since December 2022.
The Commission explained that without cost-reflective tariffs, the government compensates for the gap between the actual cost and the allowed tariff through subsidies. For ease of administration, this subsidy is applied directly to the generation costs that DisCos pay to the Nigerian Bulk Electricity Trading (NBET) at source, classified as a DisCo’s Remittance Obligation (DRO).
