NERC Report Reveals Federal Government Incurred N204.59 Billion Subsidy in Power Sector
The Nigerian Electricity Regulatory Commission (NERC) reported that the federal government incurred a subsidy obligation of N204.59 billion, as stated in its 2023 third-quarter report. The subsidy expenses were attributed to the absence of cost-reflective tariffs across all electricity distribution companies (DisCos).
This highlights the ongoing challenge of balancing the cost of electricity generation and distribution with the need for sustainable tariffs to cover expenses. The subsidy obligation underscores the complexities in Nigeria’s power sector and the ongoing efforts to address financial viability and sustainability.
“It is important to note that due to the absence of cost-reflective tariffs across all DisCos, the government incurred a subsidy obligation of N204.59 billion in 2023/Q3 (average of N68.20 billion per month), which is an increase of N69.37 billion (+51.30 percent) compared to the 135.23 billion (average of ₦45.08 billion per month) incurred in 2023/Q2; this increase is largely attributable to the government’s policy to harmonize change rates,” the report said.
The Nigerian government, under the administration of Bola Ahmed Tinubu, has suspended the payment of electricity tariffs and has committed to paying a subsidy of N900 billion in the last quarter of 2023. Minister of Power, Chief Adebayo Adelabu, raised questions about the essence of privatizing assets if the government continues to fund operations.
He mentioned that a policy statement would be issued soon toward taking over the distribution side of the power supply value chain. The minister expressed concerns about subsidizing the operations of privatized distribution companies (DisCos). Co-ordinating Minister for the Economy, Wale Edun, also noted disappointment with the underperformance of the power sector privatization and emphasized the government’s focus on renewable energy for a greener and cleaner power supply.
“Power is one of the Bola Ahmed Tinubu’s priority areas to drive a rapid, sustained economic growth.
“Power is clearly at the heart of his program. We cannot have industrialization and growth in manufacturing without electricity.
Forty percent of the Nigerian population does not have access to electricity and clearly to Mr President, that is unacceptable.
The Co-ordinating Minister for the Economy, Wale Edun, expressed disappointment with the outcome of the privatization exercise in the Nigerian power sector conducted ten years ago.
He noted that the privatization had underwhelmed and underperformed, emphasizing the importance of involving stakeholders in conversations and solutions to address the challenges facing the sector. This acknowledgment underscores the need for a comprehensive and collaborative approach to find effective solutions and improve the performance of the power sector in Nigeria.
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“In addition to all other options that we have for pricing electricity, we now have an array of options with renewable energy. It cannot be that we have the choice of going all green, all we want to see is a solution of providing power and growing the economy rapidly.
“So, that is the mandate for all stakeholders. They should protect the environment, but more importantly, they must provide the basis for growing Nigeria’s economy,” he said.
