Kehinde Fajobi
The Federal Government incurred an electricity subsidy obligation of ₦380.06 billion in the second quarter of 2024, according to the Nigerian Electricity Regulatory Commission (NERC). This represents a 40% drop from the ₦633.3 billion recorded in the first quarter of the year.
In its quarterly report released on Friday, NERC explained that the reduction in subsidy costs is largely attributed to the government’s decision to review tariffs for Band A customers while maintaining frozen rates for Band B to E customers since December 2022.
“It is important to note that due to the absence of cost-reflective tariffs across all DisCos, the Government incurred a subsidy obligation of ₦380.06 billion (52.51% of total NBET invoice) in 2024/Q2 (an average of ₦126.69 billion per month),” the report stated.
NERC added that the government’s subsidy burden fell by ₦253.24 billion from ₦633.3 billion in Q1 to ₦380.06 billion in Q2.
The commission clarified that subsidies are applied to cover the difference between the cost-reflective tariff and the lower rates charged to consumers, specifically targeting the generation cost payable by Distribution Companies (DisCos) to the Nigerian Bulk Electricity Trading (NBET).
The report emphasised that without cost-reflective tariffs, the government has to fill the gap through these subsidies to ensure the continuity of electricity services.