Nigeria’s Spiralling Electricity Subsidy Soars to ₦1.91 Trillion as Revenue Collection Climbs
Nigeria’s federal government has spent a staggering ₦1.91 trillion on electricity subsidies in the first eleven months of 2024, according to new data from the Nigerian Electricity Regulatory Commission (NERC). This figure represents a 204 percent increase from the ₦628.6 billion recorded in 2023, underscoring the nation’s mounting financial commitment to keeping electricity affordable despite ongoing reforms aimed at reducing subsidy obligations.
NERC’s report reveals that subsidies climbed each quarter of the year despite a targeted reduction policy introduced in April, which removed subsidies for customers in Band A, raising their tariff from ₦68 to over ₦200 per kilowatt-hour. Nevertheless, the federal government has continued to bear the financial gap created by non-cost-reflective tariffs for lower-tier Bands B to E, where customers pay only about a third of the actual cost.
“This subsidy approach is designed to provide a phased transition to cost-reflective tariffs, particularly for the less privileged,” the report reads. However, the government’s commitment to fill this gap has strained public finances as generation costs surged from ₦63.8 in January to ₦117.27 per kilowatt-hour in November. October and November alone saw subsidy costs reach ₦380 billion despite frequent national grid collapses, which further undermined service delivery.
While subsidy costs have skyrocketed, electricity distribution companies (Discos) have improved revenue collection efficiency, collecting ₦1.23 trillion in revenue between January and September—surpassing the full-year collections of previous years. According to the NERC data, Discos achieved 79 percent revenue efficiency, billing a total of ₦1.548 trillion over the nine-month period. August and September marked collection peaks, with ₦168.7 billion and ₦171.6 billion collected, respectively.
Despite increased collections, payment gaps persist due to the shortfall between cost-reflective rates and subsidised tariffs. Sunday Oduntan, Executive Director of Research and Advocacy at the Association of Nigerian Electricity Distributors, criticisedthe government for delayed subsidy payments. “Only customers in Band A pay the true cost of electricity,” Oduntan said, noting that subsidies covering Bands B to E have led to significant debt accumulation.
As the year’s final quarter unfolds, the government faces a tough balancing act—keeping electricity affordable for millions while reducing reliance on costly subsidies. For now, the federal budget continues to shoulder an ever-growing financial load in Nigeria’s ambitious yet fraught journey toward a sustainable and fair energy future.
