AGS NEWS – The Federal Government’s electricity subsidy obligation soared from N252.76 billion to N633.30 billion in the first quarter of 2024, according to a report by the Nigerian Electricity Regulatory Commission (NERC).

NERC revealed that the subsidy increased to N211.10 billion per month in early 2024, compared to N84.25 billion per month in the last quarter of 2023.

This rise is attributed to the government’s policy of harmonizing exchange rates while maintaining the end-user customer tariffs set in December 2022.

The regulator stated that due to the lack of cost-reflective tariffs across all distribution companies, the government had to cover the gap, resulting in a subsidy obligation of N633.30 billion in Q1 2024, a 150.56 percent increase from Q4 2023.

The subsidy is applied to the generation cost payable by distribution companies (Discos) to the Nigerian Bulk Electricity Trading Plc (NBET).

In Q1 2024, the DRO-adjusted invoice from NBET to Discos was N65.96 billion, with a remittance of N65.52 billion, translating to a 99.33 percent remittance performance.

This is a significant improvement from the 69.92 percent performance in Q4 2023.

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On April 3, NERC cut off subsidy payments in Band A areas, raising tariffs from N68 to over N200 per kilowatt-hour.

The electricity claims for April, May, and June were N140 billion, N102.30 billion, and N158.53 billion, respectively, reflecting the Band A subsidy removal. This is higher than the N84 billion monthly average in Q4 2023.

NERC recently removed NBET from the power purchase agreements between Discos and Gencos, allowing direct transactions between these parties.

Meanwhile, the International Monetary Fund (IMF) has urged Nigeria to eliminate implicit energy subsidies, warning that they could consume three percent of the nation’s GDP in 2024, up from one percent the previous year.

The IMF suggested that adjusting tariffs could reduce subsidy expenditure while providing relief to the poor, particularly in rural areas.