Strong indications suggest that the Federal Government is contemplating the request from power distribution companies to review their tariff. The government’s spending on electricity subsidy has surged to N2.8 trillion, prompting considerations for potential changes in the tariff structure.
According to a new report released by the Nigerian Electricity Regulatory Commission and made available to the press on Sunday, it revealed that previous increases in electricity tariffs by Distribution Companies (Discos), resulted in the government avoiding an additional N1trn subsidy payment to power companies every year.
The July 2023 NERC report was titled, ‘Overview of the Nigeria Electricity Supply Industry.’
Providing an update on the country’s tariff review journey, the commission stated that “between January 2020 and January 2023, tariff increased from 55 per cent of cost recovery to 94 per cent.
On subsidy payable, the NERC stated that subsidy (tariff shortfall) paid by the Federal Government between 2015 and 2022 rose to N2.8tn in December last year.
It added that between January and April this year, subsidy on electricity gulped N57bn, adding that the Service-Based Tariff scheme help in reducing the amount spent by the government on power subsidies.
“Annual subsidy reduced from N528bn in 2019 to N144bn in 2022. Subsidy in 2023 year-to-date (January to April 2023) stood at N57bn.
“Service-Based Tariff was instrumental to the reduction of tariff subsidy. The financial burden of tariff subsidies between 2015 and 2022 stood at NGN2.8tn,” the NERC stated.
The yearly hikes in power tariffs by the Federal Government through the NERC have been targeted at ending subsidies on electricity.
The report stated that the NERC disclosed this in a notice, as it said the Discos stated that their reasons for the rate review were premised on factors affecting the quality of service, operations and sustainability of the companies.
