Nigeria’s Electricity Subsidy Set to Surpass N2.4tn by Year-End – FG

The Federal Government, through the Nigerian Electricity Regulatory Commission (NERC), has announced plans to spend approximately N2.4 trillion on power subsidies by the end of this year.

Dr. Yusuf Ali, NERC’s Commissioner for Planning, Research, and Strategy, made this disclosure at PwC’s Annual Power and Utilities Roundtable in Lagos on Thursday. The event was themed ‘Reigniting Hope in Nigeria’s Electric Power Sector.’

Ali explained that the subsidy amount had fluctuated due to foreign exchange challenges and tariff adjustments. As of November, the subsidy had reached N1.9 trillion. However, based on current trends, the monthly subsidy for electricity is projected to rise to N260 billion in December.

“This N2.4 trillion estimate is based on annual projections, but it could adjust depending on the monthly tariff costs and benefits,” Ali said. He further elaborated that the subsidy is calculated each month by determining the difference between the cost-reflective tariff and the approved tariff.

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The government will finalize the total subsidy figure by the end of the year, taking into account actual consumption and tariff trends.

The Minister of Power, Adebayo Adelabu, represented by Adedayo Olowoniyi, the Chief Technical Adviser to the Minister, shared that the Ministry of Power, in collaboration with PricewaterhouseCoopers (PwC), had developed a draft Integrated National Electricity Policy. This policy aims to address the critical challenges facing Nigeria’s power sector.

Adelabu emphasized the need for cost-reflective tariffs to attract investments and ensure the sector’s long-term sustainability. “A market that does not promise a return for investors will fail to attract the necessary investment,” he noted.

Old Electricity Tariff NERC

While acknowledging the hesitance to adopt cost-reflective tariffs, Adelabu argued that this step is essential to achieving 24-hour electricity and universal access. He also highlighted the administration’s efforts under the Renewed Hope Agenda, including the implementation of the Electricity Act of 2023 and the Presidential Power Initiative in partnership with Siemens.

The Minister pointed out that challenges like vandalism, aging infrastructure, and inefficiencies in the electricity value chain have slowed progress. He noted that the Transmission Company of Nigeria (TCN) had spent nearly N10 billion in six months repairing vandalized towers.

“Our progress has not been without setbacks,” Adelabu admitted. “Frequent grid disturbances due to inadequate capacity and persistent vandalism have hindered sector development.”

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He emphasized that the government’s initiatives focus on infrastructure development, such as building new substations and upgrading transmission and distribution networks.

Adelabu praised PwC’s involvement in drafting the Integrated National Electricity Policy, which will guide the sector’s strategic direction. The policy’s goals include fostering market discipline, improving energy delivery efficiency, and ensuring that subsidies are directed to those most in need.

He concluded with a call for collective responsibility among all stakeholders: “Hope is not passive. We must innovate and implement bold ideas to restore confidence and create a sustainable energy future for all Nigerians.”

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