By Obas Esiedesa, Abuja

The Nigerian Electricity Regulatory Commission (NERC) has reported a 2.76% increase in electricity subsidies payable by the Federal Government for December 2024, reaching ₦199.64 billion, up from ₦194.26 billion in November. This rise is attributed to fluctuations in exchange rates, inflation, and changes in power generation capacity.

Electricity Tariffs Remain Frozen for Most Consumers

Under the December 2024 Multi-Year Tariff Order (MYTO), electricity tariffs remain unchanged for all customer categories:

• Band A Customers: Continue paying ₦209/kWh.
• Bands B to E Customers: Tariffs remain frozen at 2022 rates.

This freeze requires the Federal Government to provide subsidies to cover the shortfall for distribution companies (DisCos) to maintain service levels.

Breakdown of Subsidy Beneficiaries:

1. Abuja DisCo: ₦29.10 billion (up from ₦27.86 billion in November).
2. Ikeja Electric: ₦26.68 billion in subsidies.

Factors Behind the Subsidy Increase

NERC identified several factors necessitating a minor tariff review:

• Exchange Rate: Pegged at ₦1,687.45 to the dollar.
• Inflation: Increased to 33.9% in December.
• Generation Capacity: Adjustments based on available power supply.

Additionally, the benchmark gas-to-power price remains at $2.42/MMBTU, as set by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

The Commission reiterated that tariffs would continue to be subject to monthly adjustments based on indices such as inflation, exchange rates, and gas prices.

Subsidies Under Fire for Lack of Value

Despite the increased subsidies, critics argue that the power sector has failed to deliver adequate services to consumers.

Consumer Advocate Speaks Out

Executive Director of the Electricity Consumers Protection Centre, Chief Princewill Okorie, criticized the inefficiency of subsidies:

“The government cannot continue to fund the DisCos while they fail to provide the services they are required to provide. Power supply has been abysmal, and consumers are billed for electricity they did not consume through estimated billing by the DisCos.”

Okorie emphasized that without significant improvements in power supply and billing practices, subsidies offer little value to consumers.

Challenges in Nigeria’s Power Sector

The rising subsidies highlight ongoing issues within Nigeria’s power sector, including:

1. Inadequate Power Supply: Consumers face frequent outages despite the substantial subsidies provided to DisCos.
2. Estimated Billing: Many customers continue to receive inflated bills due to the lack of accurate metering.
3. DisCos’ Performance: Persistent concerns over the inefficiency and accountability of distribution companies.

 Path Forward for the Power Sector                               To address these challenges, stakeholders are calling for reforms aimed at improving efficiency and transparency in the electricity value chain. Key recommendations include:

1. Metering Consumers: Expanding the deployment of prepaid meters to eliminate estimated billing.
2. Regulatory Oversight: Strengthening NERC’s monitoring of DisCos to ensure they meet performance benchmarks.
3. Cost-Reflective Tariffs: Gradually transitioning to tariffs that reflect the true cost of electricity, reducing dependency on government subsidies.
4. Investment in Infrastructure: Upgrading generation, transmission, and distribution infrastructure to improve reliability and capacity.

 Conclusion

The Federal Government’s increased electricity subsidies reflect a commitment to maintaining stable tariffs for Nigerian consumers. However, the inefficiencies and lack of accountability in the power sector raise questions about the sustainability of this approach.

As the government works to address these challenges, achieving a balance between affordability, quality service delivery, and sector profitability remains crucial for the long-term development of Nigeria’s power industry.