Nigerian electricity consumers, particularly those connected to Band A feeders, may soon see another tariff hike as the Federal Government grapples with an escalating electricity subsidy shortfall.
Recent reports indicate that the government’s subsidy bill surged to N181.63 billion in September, up from N102.30 billion in May.
In April, the Nigerian Electricity Regulatory Commission (NERC) announced the removal of subsidies for Band A feeders, which provide customers with a minimum of 20 hours of power daily. This led to an initial tariff increase for Band A consumers to N225 per kilowatt-hour (kWh), drawing widespread criticism from labour unions, educational institutions, and healthcare facilities as electricity bills tripled.
To alleviate the backlash, the government reduced the tariff to N206.80/kWh in May, when the subsidy had decreased to N102.30 billion. However, as the subsidy rose again to N158 billion in July, the tariff was adjusted to N209/kWh. By September, the subsidy had climbed further to N181.63 billion, prompting speculations of another potential tariff increase in line with the Multi-Year Tariff Order (MYTO) expected in October.
NERC attributed the rising subsidies to Nigeria’s foreign exchange crisis, with the dollar exchange rate increasing from N1,494.1 in July to N1,601.5 by September. Inflation, which stood at 33.40% in July 2024, along with fluctuating gas prices and power generation costs, continues to exert pressure on electricity tariffs.
Electricity distribution companies (Discos) have called for the removal of subsidies across all consumer bands, arguing that non-cost-reflective tariffs hinder their ability to off-take power from the grid. Future tariff adjustments will factor in the exchange rate, inflation, gas prices, and overall generation capacity.
