Data from the revised price plan for the eleven Electricity Distribution Companies across the nation indicates that the Federal government would provide an electricity subsidy of around N1.67 trillion in 2024.
According to the same document, the amount is a 170% increase from the N619 billion allegedly paid in 2023.
Ikeja DisCo customers stand to gain the most from the proposal, as N238 billion has been set aside as a subsidy for the Disco in 2024—an increase from the projected N77.41 billion paid in 2023. The Abuja electrical Distribution Company (AEDC), which is anticipated to get an electrical subsidy of over N233 billion this year, comes in close second.
Yola Electricity DisCo had the least amount projected for subsidy in the year with just N64.48 billion up from N45.95 billion reportedly paid as subsidy in 2023.
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The amount for subsidy was calculated using the revised tariff for Electricity Distribution companies across the country factoring inflation in Nigeria and the United States, gas prices, exchange rate of the NGN to the USD, energy generated and delivered etc.
The Nigeria Electricity Regulatory Commission (NERC) pegged the billable electricity tariff for most DisCos below the calculated cost-reflective tariff leading to the subsidy.
For the Benin DisCo, the cost-reflective tariff arrived at between the DisCo and NERC stood at N126.0 per kWh. However, the NERC approved DisCos to charge N60.1 per kWh leading to a subsidy of N65.90 per kWh.
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Similarly, the cost-reflective tariff for the Ikeja DisCo is N112.1/kWh but the approved user tariff is N56.6 per kWh for the year 2024.
This results in a monthly subsidy payment of N19.85 billion- the highest in the country for the year.
No provision for electricity subsidy in 2025 and beyond
While the Nigeria Electricity Regulatory Commission (NERC) provided for electricity subsidy in 2024, there is no provision for subsidy in the year 2025, 2026 and 2027.
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The Chairman of the NERC had hinted that the tariff will be adjusted with time, and the continuation of the electricity subsidy is due to the increase in inflation and cost of living across the country.
Nigerians are currently battling a cost-of-living crisis with inflation at a 27-year high mainly propelled by rising food and transport cost.
An approval of the cost-reflective tariff by the NERC will almost double the electricity tariff across many DisCos which will further worsen the inflationary pressure on Nigerians and scuttle the President’s drive to see inflation drop to 21.4% in 2024.
