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FG’s monthly electricity subsidy spending to crash by 52% on new tariff hike 

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The Nigerian government’s move to revise electricity tariffs is set to deliver a 52% cut in monthly subsidy expenses.

The reduction will see the current N261.2 billion figure fall to around N125.94 billion, unlocking a significant N135.26 billion in monthly fiscal savings. 

The heart of Nigeria’s political power, Abuja, harbors the most considerable congregation of premium electricity consumers classified under Band A who will invariably bear the brunt of this cost recalibration.  

Here is a breakdown of the impact of the new tariff hike on the subsidy costs for each Power Distribution Company (DisCo) as presented by the Nigerian Electricity Regulatory Commission (NERC): 

 

 

 

 

 

 

 

 

 

 

 

These adjustments represent a significant shift in the government’s spending on electricity subsidies across the nation, aiming to align the cost of power more closely with the actual supply and demand dynamics in the market.

These adjustments represent a significant shift in the government’s spending on electricity subsidies across the nation, aiming to align the cost of power more closely with the actual supply and demand dynamics in the market.

The reduction in subsidy spending, particularly when economic pressures are mounting due to other macroeconomic factors, could have far-reaching implications for both consumers and the power sector. 

The revision of electricity tariffs in Nigeria is a complex process that takes into account several key assumptions. These factors are not only crucial but also intricate, forming the backbone of the cost-reflective pricing model adopted for electricity tariffs. 

Contractual agreements for the supply and transportation of gas are also a determinant. If the contracts stipulate prices that are above the domestic gas obligation supply rates, this could raise operational costs. 

The benchmark gas transportation tariff adds to the overall cost of getting the gas to the power plants. Any increase in this tariff will affect the final cost of electricity generation.  

All these factors combine to determine the cost-recovery tariff that Discos needs to charge to maintain its operations and potentially invest in infrastructure and improvements.  

Electricity customers are divided into different tariff classes within various service bands determined by their level of electricity consumption and the type of connections they have. The service bands range from Lifeline to E, with Lifeline being the category for the most economically vulnerable consumers who use a very small amount of electricity. 

 

 

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