Nigeria Govt Requires N3.2 Trillion to Reverse Electricity Tariff Increase

The Federal Government has disclosed that it would need approximately N3.2 trillion to subsidize electricity in 2024 if the current tariff increase is to be reversed. This announcement was made by Mr. Sanusi Garba, Chairman of the Nigeria Electricity Regulatory Commission (NERC), during a stakeholders’ meeting organized by the House of Representatives Committee on Power in Abuja on Thursday.

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Garba emphasized that the investments in the electricity sector were insufficient to ensure consistent power supply nationwide. He highlighted concerns about foreign exchange fluctuations and non-payment for gas, warning that failure to address these issues could lead to a collapse of the sector.

Before the tariff review, Electricity Distribution Companies (DisCos) were only required to pay 10% of their energy invoices, contributing to a liquidity challenge due to lack of cash backing for subsidies. This has resulted in declining gas supply and power generation, contributing to the sector’s challenges.

From January 2020 to 2023, the tariff increased from 55% to 94% of cost recovery, with Garba noting that unification of foreign exchange rates and current inflation pressures could push the cost-reflective tariff to N184/kWh.

Garba underscored that if no action is taken, the National Assembly and the Executive would need to allocate about N3.2 trillion to subsidize electricity in 2024. He highlighted that out of the N645 billion subsidy in 2023, only N185 billion was cash-backed, leaving a significant funding gap of N459.5 billion.

The Vice-Chairman of NERC, Mr. Musiliu Oseni, supported the recent tariff increase, emphasizing its necessity to prevent a collapse of the electricity sector.

In response, Rep. Victor Nwokolo, Chairman of the Committee, affirmed that the meeting aimed to address tariff increases and related issues. He acknowledged the insights provided by NERC and DISCO officials, emphasizing the necessity of tariff adjustments to accommodate Nigeria’s population growth and expand network infrastructure. However, he noted the absence of representatives from the Transmission Company of Nigeria and Generation Companies at the meeting, indicating that further discussions were needed to comprehensively address industry challenges.