Business News

FG will require N3.2 trillion to subsidise electricity in 2024 without tariff hike- NERC

The Federal Government asserts it needs approximately N3.2 trillion to subsidize electricity in 2024 should the current tariff hike be reversed.

Mr. Sanusi Garba, Chairman of the Nigeria Electricity Regulatory Commission (NERC), disclosed this during a stakeholders’ meeting convened by the House of Representatives committee on Power in Abuja on Thursday.

Garba emphasized that the investments in the sector were insufficient to ensure consistent power supply nationwide. He further warned that without addressing foreign exchange fluctuations and gas payment issues, the sector would face collapse.

Prior to the tariff review, Electricity Distribution Companies (DisCos) were only required to pay 10 percent of their energy invoices, exacerbating liquidity challenges in the absence of sufficient subsidy funds.

Non-payment of subsidy has led to decreased gas supply and power generation, contributing to ongoing declines in generation and system collapse, largely stemming from liquidity issues.

Between January 2020 and 2023, tariff increments escalated from 55 percent to 94 percent of cost recovery.

Garba further explained that only N185 billion of the N645 billion subsidy allocated in 2023 was backed by cash, resulting in a substantial funding gap of N459.5 billion.

Musiliu Oseni, Vice-Chairman of NERC, defended the recent tariff hike, asserting its necessity to prevent the sector from complete collapse.

Committee Chairman Rep. Victor Nwokolo clarified that the purpose of the meeting was to tackle the tariff increase and the categorization issue, particularly regarding Band A and other categories.

Nwokolo acknowledged that officials from NERC and DISCOS had provided valuable information to the committee during the session.

The Nigeria Electricity Regulatory Commission (NERC) earlier in the month increased electricity tariff for band A customers by over 200% to N225/KWh.

The decision is to reduce the electricity subsidy burden on the federal government.