Federal Gov’t To Pay N1.6trn Electricity Subsidy As DisCos Unveil New Tariffs

Date:

Jan 18,2024.

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The Nigerian Electricity Regulatory Commission (NERC) has approved new electricity tariffs for the 11 distribution companies in the country, effective from January 2024.

NERC chairman, Sanusi Garba, who made this known at a media interaction yesterday, however assured that customers will continue to pay the current tariffs as the federal government is to subsidise the increased tariffs to the tune of N1.6 trillion this year.

Garba said the federal government will continue to subsidise electricity to ease the financial burden on Nigerians due to economic challenges in the country. NERC also approved a monthly tariff review of the DisCos going forward arising from changes in exogenous indices, which include changes in the inflation rates, Naira/USS exchange rates, and gas-to-power prices.*

Government has decided for now, arising from the cost of living crisis and so many others, to in the meantime continue to subsidise electricity. In the new tariff order just published by the commission, you will discover that tariff is not going up but you will see what the Electricity Distribution Companies (DisCos) should be charging.

“You will also see in the tariff order the amount of subsidy the government will be providing to cover the gap between what they will charge and what they are allowed to charge,” he said.

According to him, the new tariff contains what the DisCos are allowed to charge based on government policy, if they are to remain in service.

He said that in the tariff, NERC included some provision that would ensure that the DisCos pay what they are obligated to pay.

A breakdown of the approved tariffs indicates that the cost-reflective tariff for Abuja Electricity Distribution Company is N120.88 per kilowatt-hour (kWh).

However, a tariff of N63.24/kWh is allowed by NERC, indicating a shortfall of N58.12/kWh, which is subsidised by the federal government.*

The commission said that in line with the policy direction of the federal government on electricity subsidy, the allowed tariffs are frozen for all customers at the rates payable since December 2022.

With this policy, the estimated subsidy benefit for customers under AEDC franchise in 2024 is approximately N233.26 billion, which translates to N19.44 billion monthly.*

The allowed tariff is with effect from 1st January 2024 and shall remain in force, subject to further policy direction of the FGN,” the commission stated.

For Ikeja Electric, the cost-reflective tariff is N128.18, while the approved tariff is N56.6, leaving a shortfall of N53.5/kWh.

With this policy, the estimated subsidy benefit for customers under Ikeja Electric franchise in 2024 is approximately N238.201 billion (i.e., N19.85 billion monthly), also effective from the tariff which will be in effect from 1st January 2024.

The estimated subsidy benefit for customers under the Ibadan DisCo franchise in 2024 is approximately N199.841 billion (i.e.N16.65 billion monthly).

Garba said that the Electricity Act signed by President Bola Tinubu in 2023 presented an opportunity for states to make laws and take charge of providing electricity in their franchise areas.

He said that the commission remained committed to working with the states in such a manner that the existing public utilities were nurtured to provide services to Nigerians and were utilised for what they were intended for.

On metering, the chairman said that the commission had identified that the Electricity Distribution Companies had challenges with finances to meter their customers.

He said that the rate of metering had been adversely impacted by the inability of DisCos to raise the required capital from the banks.

“To reduce the rate of estimated billing, the commission created a framework under which the distribution companies can raise some amount of money to meter customers. So we decided that from the market revenues, we set aside a fixed amount that is dedicated to the provision of metering.

“We are not saying that the money from the market on a monthly basis is the money to buy a meter. It is a potential lender to raise a pathway to pay whatever loan DisCos are going to get to provide meters,” he said.(www.naija247news.com)

Peter Okafor
Peter Okaforhttp://Naija247news.com
Peter Okafor Financial Journalist | Editor | Contributor Overview: Peter Okafor is a seasoned Financial Journalist, astute Editor, and valued Contributor at Naija247news Media Group. With an unwavering passion for dissecting complex financial landscapes, Peter has become a trusted name in delivering incisive and insightful coverage of economic events, market trends, and corporate dynamics. Professional Journey Peter's journey in financial journalism has been marked by a commitment to excellence. Joining the ranks of Naija247news, he has consistently demonstrated a keen understanding of the intricate interplay between finance and the global socio-economic fabric. Expertise: Specializing in financial markets, economic analyses, and business developments, Peter Okafor has honed his expertise over the years. His ability to unravel intricate financial narratives and present them in a comprehensible manner sets him apart in the world of financial journalism. Contributions As an Editor and Contributor, Peter has played a pivotal role in shaping the narrative of Naija247news. His contributions extend to thought-provoking articles, in-depth market analyses, and coverage of key events that impact the financial landscape. Educational Background: Peter holds a degree in Journalism, complemented by specialized courses in Finance and Business Reporting. His educational foundation has provided him with the tools to navigate the intricate world of financial journalism. Innovation and Adaptability: In an era of evolving media landscapes, Peter Okafor exemplifies innovation and adaptability. Leveraging digital platforms and emerging technologies, he ensures that financial insights reach a diverse audience, fostering financial literacy and awareness. Awards and Recognition: Peter's commitment to journalistic excellence has not gone unnoticed. He has been the recipient of several awards, recognizing his outstanding contributions to the field of financial journalism. Vision for the Future: Looking ahead, Peter Okafor envisions a future where financial journalism continues to empower individuals, shape economic policies, and drive positive change. His dedication to staying at the forefront of financial news underscores his commitment to this vision. Connect with Peter Okafor: - LinkedIn: [Peter Okafor](#) - Twitter: [@PeterOkafor_N247](#) In the dynamic realm of financial journalism, Peter Okafor stands as a stalwart, combining experience, expertise, and a forward-looking vision to illuminate the path of financial understanding for a global audience.

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