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 third quarter of the year 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) in the form of 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 that 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 percent) 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 harmonize exchange rates.
- The rise in the government’s subsidy obligation meant that in 2023/Q3, Discos were only expected to cover 45 percent 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 percent of its revenue requirement from the Discos.
NERC also observed that during the three quarters from electricity bills from Discos, consumers paid N349.55 billion in first quarter, 354.61 billion in the second quarter, and N359.38 billion in the third quarter. The total bill for the nine-month period was N1.06tn.
Read more: https://www.investingport.com/nerc-...n-on-subsidizing-electricity-for-nine-months/