Power distribution companies (DisCos) received ₦52.7 billion as electricity subsidy payments from the federal government between January and March 2023 (Q1, 2023).
This was disclosed by the Executive Director of PowerUpNigeria, a power consumer advocacy group, Adetayo Adegbemle, at the power conference held recently in Abuja.
According to Adegbemle, the FG initiated subsidy in the electricity sector as a policy consideration aimed to help consumers who may not truly afford the high cost of the tariff.
Speaking further, he said the subsidy regime in the electricity industry was also set up to stabilise the country's economy by ensuring a stable power supply and as a political tool aimed at mitigating possible social unrest.
The 11 DisCos include Abuja, Benin, Eko, Enugu, Ibadan, Ikeja, Jos, Kaduna, Kano, Port Harcourt, and Yola.
The Nigeria Electricity Regulatory Commission, NERC in 2022, introduced the Multi-Year Tariff Order (MYTO) to replace electricity subsidy. With this, electricity consumers were supposed to start paying Cost Reflective Tariffs.
The FG however, stopped the tariff review in July 2023, a move which destabilised the plan and further stopped the aim of phasing out the subsidy in electricity tariff.
NERC in its just-released third quarter 2023 report further linked the continuous subsidy in the electricity sector to the absence of cost-reflective tariffs.
It said, “In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff shortfall funding. This funding is applied to the NBET (Nigerian Bulk Electricity Trading company) invoices that are to be paid by DisCos.”
Adegbemle however, noted that the subsidy regime in the electricity sector which was mainly funded from various pools such as the budget appropriation, FG commitments, World Bank guarantees and loans, as well as Central Bank of Nigeria facilities was not attainable.
According to The Punch, the FG has spent ₦375.8 billion on electricity subsidy between January and September 2023.