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The Federal Government’s expenditure on electricity subsidies surged to ₦199.64 billion in December 2024, marking a 2.76% increase from the ₦194.26 billion spent in November, according to the Nigerian Electricity Regulatory Commission (NERC).
The rise was attributed to fluctuations in key economic indicators, including the exchange rate, which NERC pegged at ₦1,687.45 to the dollar, an inflation increase to 33.9%, and changes in available power generation capacity.
These factors necessitated a minor review under the ‘December 2024 Multi-Year Tariff Order’ report.
Despite these changes, NERC noted that electricity tariffs for all customer categories were retained.
While Band A customers continued to pay ₦209/kWh, tariffs for customers in Bands B to E remained frozen at rates first set in December 2022.
As a result of this policy, the Federal Government is expected to spend ₦29.10 billion as subsidies for consumers under the Abuja Electricity Distribution Company (AEDC), up from ₦27.86 billion in November.
Similarly, consumers under Ikeja Electric will receive ₦26.68 billion in subsidies.
Wholesale Gas-to-Power Prices Unchanged
NERC stated that the benchmark gas-to-power price remains unchanged at $2.42/MMBTU.
This pricing is aligned with the benchmark set by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).
The commission emphasized that the approved tariffs would stay in place but remain subject to monthly adjustments linked to key indices such as the inflation rate, the NGN/USD exchange rate, and gas-to-power prices.
NERC stated: “The review maintains the benchmark gas-to-power price of $2.42/MMBTU based on the established benchmark price of gas-to-power by the Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA.”
The Commission maintained that the “approved tariffs shall remain in force subject to monthly adjustment of pass-through indices including inflation rate, NGN/dollar exchange rate and gas-to-power prices.”
Context and Broader Impact
The increase in electricity subsidies follows the Federal Government’s removal of petrol subsidies in May 2023, a policy change announced by President Bola Tinubu.
This move caused petrol pump prices to rise significantly, from around ₦189 per litre to over ₦1,000 per litre.
The rising cost of subsidies and its impact on government finances has been a topic of debate, with many calling for reforms to reduce the fiscal burden on the government.
