Nigerian Electricity Tariffs Set to Rise Amid Soaring Subsidies
Nigerians receiving power from Band A feeders may face yet another increase in electricity tariffs as the government struggles to cover ballooning subsidy costs. In September alone, the Federal Government’s subsidy on electricity soared to ₦181.63bn, up from ₦102.30bn in May, signalling an impending price hike.
Earlier this year, the Nigerian Electricity Regulatory Commission (NERC) scrapped subsidies for Band A consumers—those enjoying a minimum of 20 hours of power daily—raising their tariff to ₦225 per kilowatt-hour. The move, intended to reduce the financial burden on the government, sparked outrage from various sectors, including labour unions, educational institutions, and hospitals, as their electricity bills tripled overnight.
Subsequent months saw the tariff fluctuate, with a reduction to ₦206.80 per kWh in May, followed by an increase to ₦209 per kWh in July as subsidies rose again. According to recent NERC data, subsidies continued their upward trajectory, reaching ₦173.88bn in August and ₦181.63bn in September. As costs rise, industry experts warn that the next Multi-Year Tariff Order (MYTO) could bring higher rates unless power generation costs drop significantly.
A major factor driving these surging subsidies is Nigeria’s foreign exchange crisis. NERC has pegged the exchange rate at ₦1,494 per dollar in July, rising to ₦1,601.5 by September, exacerbating the cost of power production. With inflation also climbing—Nigeria’s rate hitting 33.4% in July 2024—the price of generating electricity continues to rise.
Though tariffs have not yet been officially adjusted to reflect these escalating costs, many fear it is only a matter of time. Distribution companies (Discos) have voiced concerns over operating at a loss, with some refusing to off-take electricity from the grid due to non-cost-reflective tariffs. The Minister of Power, Adebayo Adelabu, recently criticised Discos for rejecting power, warning that their reluctance could risk grid stability.
Despite the government’s efforts to raise generation capacity to 6,000 megawatts by the end of the year, the future of Nigeria’s power sector remains uncertain, as consumers brace for potentially steep hikes in the coming months.
