FG Pays ₦205 Billion On Electricity Subsidy – Report Reveals

A recent report by the Nigerian Electricity Regulatory Commission (NERC) for the third quarter of last year indicates that the Federal Government paid approximately ₦205 billion in electricity subsidies.

The report highlighted that the government’s subsidy obligation for 2023/Q3 amounted to ₦205 billion, averaging N68 billion per month.

Naija News understands that the reported figure represents a significant increase of ₦69 billion compared to the ₦135 billion incurred in 2023/Q2, with an average of ₦45 billion per month.

The rise in subsidy payments is primarily attributed to the government’s initiative to standardize exchange rates, which was initiated in response to the lack of cost-reflective tariffs among all electricity distribution companies (DisCos).

The government commits to bridging the gap between cost-reflective tariffs and allowing tariffs through tariff shortfall funding in the absence of cost-reflective tariffs. This funding is allocated to the Nigerian Bulk Electricity Trading (NBET) invoices that DisCos are required to pay.

The DisCos’ obligation to cover a portion of the invoice is determined by their Minimum Remittance Obligation (MRO) as specified in the periodic Tariff Orders issued by the commission.

According to NERC, the increase in the government’s subsidy responsibility resulted in DisCos being responsible for only 45% of the total invoice amount from the commission in Q3/2023.

According to Vanguard, this development follows a NERC report indicating that DisCos failed to remit approximately ₦50bn to the power sector in the third quarter of the previous year.

In the Q3 2023 Quarterly report, NERC highlighted that the DisCos did not remit approximately ₦50bn to NBET. As per the market remittance section, the cumulative upstream invoice payable by DisCos amounted to around N208bn.

This included ₦167bn for generation costs from NBET and ₦41bn for transmission and administrative services by the Market Operator (MO).

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