WHY NIGERIAN ELECTRICITY SUBSIDY WILL CONTINUE TO GROW

Electricity Subsidy in Nigeria grew by 22.16 per cent from N528 billion in 2019 to N645 billion in 2023, latest figures from the Nigerian Electricity Regulatory Commission, NERC, has shown

With the Commission projecting N1.6 trillion as electricity subsidy for 2024, total subsidy in the past 10 years is expected to hit N4.993 trillion by the end of the year.

A breakdown of the total amount showed that the Federal Government was expected to have remitted to the power sector N225 billion in 2015, N308 billion in 2016, N351 billion in 2017, N440 billion in 2018, N528 in 2019, N501 billion in 2020, N251 in 2021, N144 in 2022 and N645 in 2023.

The NERC data also indicated that electricity subsidy in January and February 2024 was N264 billion and with the Minister of Power,  Adebayo Adelabu acknowledging that the government was yet to pay  the subsidies for last year and the first two months this year to the market, the liquidity challenge facing the Nigerian Electricity Supply Industry, NESI, is set to escalate.

Adelabu who pointed out that while continuing payment of subsidies was unsustainable given the financial state of the government, ending it at this time was also impossible due to economic hardship faced by Nigerians following the removal of petrol subsidies and floatation of the local currency, the Naira.

NERC had in January 2024 released the new Multi-Year Tariff Order, MYTO, which raised electricity tariff for consumers across the 11 electricity companies but said the utilities could not implement the hike because the Federal Government has agreed to pay N1.6 trillion as subsidies for consumers in 2024 (a monthly average of N120 billion).

NERC stated that with the new policy, electricity tariff will remain as it has been since December, 2022. A selected analysis of the order according to DisCos showed that the government will in 2024 pay N233.26 billion (or N19.44 billion monthly) as subsidies for consumers under the Abuja Electricity Distribution Company, AEDC, franchise.

For electricity consumers served by Ikeja Electric, the government will pay N238.20 billion (or 19.85 billion monthly) as subsidies in 2024 while for consumers in Enugu DisCo’s franchise area, the government will pay N129.92 billion pay (or N10.74 billion monthly) as subsidies in 2024.

The Convener and Executive Director, PowerUp Nigeria, Mr. Adetayo Adegbemle said the government’s decision to continue paying electricity is unsustainable, predicting that revenue shortfall in the electricity market will continue to grow.

SOURCE: Vanguard