NERC Reveals on Sunday That the Federal Government Spent N375 Billion on Subsidizing Electricity For Nine Months

On Sunday, it was disclosed by the NERC that the Federal Government had spent a total of N375.8 billion on electricity subsidy between January and September this year. It also reveals that electricity consumers paid N782 billion for the commodity during this period.

The Nigerian Electricity Regulatory Commission disclosed the figures in Abuja yesterday, where the company revealed that the Federal Government subsidized electricity in Q1, Q2, and Q3 of 2023.

Also, the NERC revealed that it billed electricity consumers a total of N1.06 trillion nationwide for the first nine months of 2023 but due to blackouts, it got N782.6 billion in Nigeria.

Based on its report, the firm said that the FG subsidized power by N36 billion in Q1, which was increased to N135.2 billion in Q2 and N204.6 billion in Q3. However, the record for Q4 of 2023 is not yet available because we are in the last month.

NERC attributed the report for the year's third quarter to the absence of cost-reflective tariffs.

It said, 

• In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) through tariff shortfall funding. This funding is applied to the NBET (Nigerian Bulk Electricity Trading Company) invoices that are to be paid by Discos.

• The amount to be covered by the Disco is based on the tariff they are allowed to charge and set out as their Minimum Remittance Obligation in the periodic Tariff Orders issued by the Commission.

• It is important to note that due to the absence of cost-reflective tariffs across all Discos, the government incurred a subsidy obligation of N204.59bn in 2023/Q3 (average of N68.20bn per month), which is an increase of N69.37bn (+51.3%) compared to the N135.23bn (average of N45.08bn per month) incurred in 2023/Q2; this increase is attributable mainly to the government’s policy to harmonise exchange rates.

• The rise in the government’s subsidy obligation meant that in 2023/Q3, Discos were only expected to cover 45% of the total invoice received from NBET. For ease of subsidy administration, the MRO is limited to NBET only, with the MO (Market Operator) being allowed to recover 100% of its revenue requirement from the Discos.

Based on the payment of electricity bills, it was reported that from the three-quarters of the power regulator, consumers paid N247.09 billion, N267.86 billion, and N267.61 billion, respectively, in 2023. This totals electricity bills at N782.56 billion.

NERC also observed that during the three-quarters of electricity bills from Discos, consumers paid N349.55 billion in the first quarter, 354.61 billion in the second quarter, and N359.38 billion in the third quarter. The total bill for the nine months was N1.06tn.

In its latest third quarter 2023 report, the NERC stated that,

• The total revenue collected by all Discos in 2023/Q3 was ₦267.61bn out of ₦349.55bn billed to customers.

• This translates to a collection efficiency of 76.56%t, representing an increase of +1.02 basic points compared to 2023/Q2 (75.54%). The increase in collection efficiency can be attributed to the implementation of various collection campaigns for improved remittance by post-paid customers.

On market remittance, the NERC stated that, 

• In 2023/Q3, the cumulative upstream invoice payable by Discos was ₦208.7bn, consisting of ₦167.4bn for generation costs from NBET and ₦41.3bn for transmission and administrative services by the Market Operator.

• Out of this amount, the Discos collectively remitted a total sum of ₦158.43bn  (₦124.53bn for NBET and ₦33.9bn for MO) with an outstanding balance of ₦50.27bn.

• This translates to a remittance performance of 75.91% in 2023/Q3, which is down by 19.30 basic points compared to the 95.21% recorded in 2023/Q2.

•  For remittance by special and cross-border customers in 2023/Q3, the commission stated that none of the four international customers being supplied by Nigeria’s power generation companies in the sector made any payment against the cumulative invoice of $11.16 million issued to them by the MO for services rendered in 2023/Q3.

• Similarly, none of the 16 bilateral customers operating in the NESI (Nigeria Electricity Supply Industry) paid against the cumulative invoice of N2,814.68 million issued to them by the MO for services rendered in 2023/Q3.

However, the President of the Electricity Consumers Association told the PUNCH that there was no clear indication that the FG was paying the subsidy.

He said, “The subsidy they say the government is paying is unclear. There is no clarity on how the government pays this subsidy. If we had a transparent process, everybody would see the volume of commitment that the government is making and would be able to appreciate it.