Federal Government Pays ₦205 Billion In Electricity Subsidies, Report Reveals

Federal Government Pays ₦205 Billion In Electricity Subsidies, Report Reveals

A recent report released by the Nigerian Electricity Regulatory Commission (NERC) for the third quarter of the previous year sheds light on the substantial electricity subsidies provided by the Federal Government. According to the report, the government’s subsidy obligation for 2023/Q3 totaled approximately ₦205 billion, averaging around ₦68 billion per month……..READ ALSO Accord Party Urges Federal Government To Address High Commodity Prices Despite Naira Appreciation

This figure marks a significant increase compared to the ₦135 billion incurred in 2023/Q2, with an average monthly expenditure of ₦45 billion. The rise in subsidy payments is primarily attributed to the government’s initiative to standardize exchange rates in response to the lack of cost-reflective tariffs across all electricity distribution companies (DisCos).

To bridge the gap between cost-reflective tariffs and actual tariffs, the government has committed to providing tariff shortfall funding, allocated to the Nigerian Bulk Electricity Trading (NBET) invoices that DisCos are obligated to pay. The DisCos’ Minimum Remittance Obligation (MRO), as specified in periodic Tariff Orders issued by the commission, determines their obligation to cover a portion of the invoice.

According to NERC, the increase in the government’s subsidy responsibility has led to DisCos covering only 45% of the total invoice amount from the commission in Q3/2023. This development follows a NERC report indicating that DisCos failed to remit approximately ₦50 billion to the power sector in the same quarter.

In the Q3 2023 Quarterly report, NERC highlighted that DisCos did not remit around ₦50 billion to NBET. The cumulative upstream invoice payable by DisCos amounted to approximately N208 billion, including ₦167 billion for generation costs from NBET and ₦41 billion for transmission and administrative services by the Market Operator (MO).

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