The Federal Government paid about N205 billion as electricity subsidy in the third quarter of last year, according to data obtained from the Nigerian Electricity Regulatory Commission (NERC), latest report.
The commission’s third quarterly market report revealed that the government incurred a subsidy obligation of about N205 billion in 2023/Q3 (average of N68 billion per month), which is an increase of N69 billion, compared to the N135 billion (average of N45 billion per month) incurred in 2023/Q2.
This increase in subsidy payment, according to the report, is largely attributable to the government’s policy to harmonise exchange rates due to the absence of cost-reflective tariffs across all electricity distribution companies (DisCos).
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 Nigerian Bulk Electricity Trading (NBET) invoices that are to be paid by DisCos. The amount to be covered by the DisCo is based on the tariff that they are allowed to charge and set out as their Minimum Remittance Obligation (MRO) in the periodic Tariff Orders issued by the commission.
The NERC said the rise in the government’s subsidy obligation meant that in Q3/2023, DisCos were only expected to cover 45 per cent of the total invoice received from the commission.
The development comes on the heels of a report by NERC, that DisCos did not remit about N50 billion to the power sector in the third quarter of last year.
According to NERC, the DisCos failed to remit about N50 billion to NBET in Q3/2023.
Under the market remittance section of the Q3 2023 Quarterly report, NERC said that the cumulative upstream invoice payable by DisCos was about N208bn, consisting of N167 billion for generation costs from NBET, and N41 billion for transmission and administrative services by the Market Operator (MO).
