The Nigerian government has spent ₦199 billion in December 2024 as part of its electricity subsidy program.
This payment is an increase from ₦194.26 billion spent in November, according to the Nigerian Electricity Regulatory Commission (NERC).
The subsidy payment was disclosed in NERC’s December 2024 Multi-Year Tariff Order (MYTO) report, which was made available to the public on its website.
The report reveals that Band-A customers continued to pay N209 per kilowatt-hour (kWh), while the tariffs for other customers in Bands B to E remained frozen at the rates from December 2022.
The federal government’s total subsidy for electricity consumers across the country is aimed at reducing the financial burden of power tariffs.
According to the NERC report, significant portions of this subsidy will go to specific distribution companies, including ₦29.10 billion for consumers under the Abuja Electricity Distribution Company (DisCo) and ₦26.68 billion for those under Ikeja Electric.
The rise in the subsidy payment can be attributed to several factors, including the increase in Nigeria’s exchange rate.
The exchange rate was pegged at N1,687.45 per dollar, which significantly influenced the cost of imported components of the electricity supply chain.
Additionally, inflation in the country has surged to 33.9%, further driving up the cost of electricity generation and distribution.
These economic factors, alongside adjustments in power generation capacity, have led to the government’s higher subsidy payments in December.
NERC also confirmed that it would retain the benchmark gas-to-power price at $2.42 per million British thermal units (MMBTU), as determined by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).
This benchmark is a key component of electricity pricing, as Nigeria’s power plants depend heavily on natural gas for electricity generation.
Despite the freeze in tariffs for most electricity consumers, the government has been forced to spend more on subsidies to ensure the affordability of electricity.
“While the tariffs remain largely unchanged, the government’s expenditure on subsidies is rising due to economic factors,” said a NERC representative in the report.
NERC has emphasized that tariffs will remain subject to monthly adjustments, depending on key economic indicators.
These indicators include inflation, exchange rates, and the gas-to-power price, all of which directly impact the cost of electricity in Nigeria.
The government has been under pressure to provide affordable electricity to Nigerians, particularly in light of rising costs in other sectors of the economy.
Electricity remains one of the most crucial services for Nigerians, and the government’s subsidy program has been a lifeline for many families and businesses.
In the face of soaring inflation and an unstable exchange rate, the subsidy is seen as a temporary solution to ease the burden on consumers.
Nigerians have long struggled with power supply issues, but the subsidy has provided some relief in terms of pricing.
However, the cost of the subsidy, now at ₦199 billion for December alone, raises concerns about the long-term sustainability of such payments.
Critics argue that the government must find a way to address the root causes of the high electricity prices, such as the heavy reliance on imported gas and the need for investment in local power infrastructure.
Many believe that the government’s focus should be on improving Nigeria’s energy sector, including investments in renewable energy, to reduce the burden on electricity subsidies in the future.
Despite these challenges, the subsidy remains a crucial component of the government’s efforts to make electricity more affordable for the average Nigerian.
While the current subsidy may be helping consumers in the short term, it is unclear whether this approach can be sustained in the long run without significant reforms in the energy sector.
