The Federal Government’s monthly spending on electricity subsidies has surged to N1.91 trillion in the first 11 months of 2024, according to a recent report by the Nigerian Electricity Regulatory Commission (NERC). This marks a 204.15% increase from the N628.61 billion recorded during the same period in 2023. The rising costs reflect ongoing challenges in the power sector, despite the government’s attempt to curb the subsidy burden by eliminating subsidies for Band A customers.

Electricity Revenue Surpasses Previous Records

Power distribution companies, or Discos, collected N1.23 trillion in revenue over the first nine months of 2024. This exceeds the total revenue of N1.08 trillion collected in all of 2023, signaling a positive growth trajectory for the sector. However, the subsidy burden continues to rise, with the government covering the gap between the cost-reflective tariff and the actual tariff paid by consumers.

Quarterly Breakdown of Subsidy Costs

• Q1 (January – March 2024): N633.30 billion
• Q2 (April – June 2024): N380 billion
• Q3 (July – September 2024): N518.55 billion (a 36.46% increase)
• Q4 (October – November 2024): N380.06 billion

Despite efforts to reduce subsidies, the National Grid collapse and increasing generation costs have caused the subsidy obligation to persist. The government had initially aimed for a gradual transition to cost-reflective tariffs while offering protection to lower-income consumers.

Challenges with Subsidy Payments

A major concern raised by Sunday Oduntan, Executive Director of Research and Advocacy at the Association of Nigerian Electricity Distributors, is the government’s failure to fulfill its promise to cover the subsidy shortfalls for Band B, C, D, and E consumers. He pointed out that only Band A customers currently pay the full cost of electricity, while the government subsidizes 67% of the consumption costs for other consumers.

Revenue Growth for Distribution Companies

In terms of revenue, Discos have shown strong performance in 2024, collecting N1.23 trillion from N1.548 trillion billed, achieving 79.34% collection efficiency. Key months and revenue collections include:

• January 2024: N95 billion out of N130.92 billion billed
• February 2024: N97 billion out of N113 billion billed
• March 2024: N100.44 billion out of N126.56 billion billed
• April 2024: N142.92 billion out of N178.72 billion billed
• May 2024: N139.23 billion out of N191.65 billion billed
• June 2024: N150.86 billion out of N176.57 billion billed
• July 2024: N162.14 billion out of N197.11 billion billed
• August 2024: N168.7 billion out of N208.5 billion billed
• September 2024: N171.58 billion out of N225.8 billion billed

With this momentum, Discos are on track to surpass their revenue collections for 2021, 2022, and 2023 by the end of 2024, marking a significant improvement from the N526.8 billion in 2020, N761.2 billion in 2021, and N828.1 billion in 2022.

Electricity Tariff Adjustments and Cost Increases

The rising cost of power generation has further strained the subsidy framework. Generation costs have escalated from N63.8 per kilowatt-hour (kWh) in January 2024 to N117.27 per kWh by November 2024. This increase has prompted the government to continue covering the gap between the tariff set by NERC and the actual tariff, particularly during the transition period to cost-reflective pricing.

The government’s ongoing commitment to fund the subsidy for electricity remains a significant part of its energy policy, but questions remain about the sustainability of this model and whether the promised tariff adjustments will be fully realized.