Nigeria’s power subsidy jumps to N1.94tn; Governors reject electricity act amendment

Nigeria’s electricity tariff subsidy has surged by a massive 219.67 percent, rocketing from N610 billion in 2023 to an alarming N1.94 trillion in 2024.

This dramatic increase, despite an April 2024 Band A tariff hike, is primarily blamed on the naira’s flotation and fuel subsidy removal, leading to high inflation.

In a separate development, the nation’s 36 governors have rejected an amendment to the Electricity Act.

According to the Nigerian Electricity Regulatory Commission (NERC), the N1.94 trillion subsidy was incurred in 2024 to bridge the gap between actual and cost-reflective tariffs.

However, a mere N371.34 million (0.019 percent) of this obligation was actually paid by the Federal Government.

NERC’s 2024 report highlighted that the government’s policy to freeze tariffs despite escalating cost-reflective rates, driven by macroeconomic pressures like foreign exchange volatility, was the main culprit.

The subsidy obligation hit N633.30 billion in Q1 2024, a 303 percent increase from 2023’s quarterly average.

While a Band A tariff review in Q2 brought a 39.99 percent drop in the subsidy burden, subsequent government directives freezing all customer rates for the rest of 2024 led to renewed increases in Q3 and Q4.

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Power sector expert Bode Fadipe attributed the subsidy surge directly to the naira’s fall against the dollar, noting that almost all power components are imported and gas is dollar-denominated.

He described the government’s failure to meet its subsidy obligations as “unfortunate,” warning that the power sector might not recover for another “20 to 30 years” if current challenges persist, citing existing debts of possibly over N6 trillion to GenCos.

Fadipe, while cautious about total subsidy removal due to unclear actual electricity costs and potential energy theft, emphasized that tariff increases alone are not a “silver bullet” and called for a holistic sector review.

Meanwhile, Alhaji Aliko Dangote, President of the Dangote Group, urged Nigerian investors to prioritize the power sector.

He stated that if his group can generate 1,500 megawatts for its internal use, Nigeria as a nation should be generating 50,000 MW to 60,000 MW.

Dangote cited the refinery’s success as proof that large-scale industrial projects are achievable in Nigeria, stressing that wealthy Nigerians should invest locally instead of taking capital abroad.