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Electricity Subsidy Hits N181.63bn, Potential Tariff Hike Looms
The electricity subsidy paid by the Federal Government surged to N181.63 billion in September, up from N102.30 billion in May, indicating a potential tariff increase for customers on Band A feeders.
In April, the Nigerian Electricity Regulatory Commission (NERC) announced the removal of subsidies for customers on Band A feeders, raising their tariff to N225 per kilowatt-hour (kWh).
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EKO HOT BLOG reports that these customers, who receive a minimum of 20 hours of electricity daily, were affected by the subsidy cut. Following outcry from consumers, including labor unions and institutions, the tariff was later reduced to N206.80/kWh in May, though it was increased again to N209/kWh in July as subsidies climbed to N158 billion in June.
According to NERC data, the subsidy continued to rise, reaching N163.87 billion in July, N173.88 billion in August, and N181.63 billion in September.
The increase in subsidy costs is largely driven by the ongoing foreign exchange crisis, with the naira-dollar exchange rate escalating from N1,494.1 in July to N1,601.5 in September.
NERC’s Multi-Year Tariff Order (MYTO) has highlighted that the dollar exchange rate and inflation are critical factors in determining the cost of power production.
Electricity Subsidy Tariff Hike
The commission noted that despite the rising costs, the government has not yet approved a further tariff hike, possibly due to the current economic challenges faced by Nigerians.
Electricity distribution companies (Discos) have expressed concern over the non-cost-reflective tariffs, with some refusing to off-take electricity allocated to them from the grid.
The Minister of Power, Adebayo Adelabu, recently criticized this refusal, noting that it threatens the stability of the national grid.
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