The Federal Government spent ₦628.61bn as subsidy on electricity in 2023 as power distribution companies collected a total revenue of ₦1.08tn during the same period.
This was obtained from the data of The Nigerian Electricity Regulatory Commission on Wednesday.
It was figured out from the power sector regulator which indicated that electricity subsidies continued to increase every quarter all through last year.
Data shows that subsidy on first quarter of 2023 was ₦36.02bn, second was ₦135.23bn, third was ₦204.6bn and lastly the forth quarter of the year was ₦252.76bn.
It was also observed that during the same period, power distribution companies raked in ₦247.09bn, ₦267.86bn, ₦267.61bn, and ₦294.95bn in the first, second, third, and fourth quarters of 2023 respectively.
The rise in revenue by Discos prompted calls for improved services from the power firms, as consumers condemned the Discos’ inability to deliver satisfactorily. In the absence of cost-reflective tariffs, the Federal Government undertakes to cover the resultant gap between the cost-reflective and allowed tariff in the form of tariff subsidies.
For ease of administration, the subsidy is only applied to the power generation cost payable by Discos to the Nigerian Bulk Electricity Trading company, which is the power trader in the sector.
The transmission and administrative service costs payable by Discos to the Market Operator, an arm of the Transmission Company of Nigeria, are recovered 100 per cent.
However, it should be noted that the power generation cost is a major component that guarantees electricity generation and supply across the country. Also, the share of the NBET invoice to be covered by Discos is determined by the percentage of the generation cost they can recover from the allowed tariff and set out as their Minimum Remittance Obligation in the periodic tariff orders issued by the commission.
Commenting on the amount spent on electricity subsidy in the fourth quarter of 2023 in its latest report, the NERC said, “It is important to note that due to the absence of cost-reflective tariffs across all Discos, the government incurred a subsidy obligation of ₦252.76bn in 2023/Q4.”
“This is probably because Discos send more energy to areas where they incur more commercial losses. The inverse relationship between energy offtake by Discos and billing as well as collection efficiencies may pose challenges to the long-term growth of the NESI (Nigeria Electricity Supply Industry) unless Discos make significant progress towards improving energy accounting and addressing the major causes of losses,” it stated.
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