The Federal Government has announced it has incurred a staggering N1.94 trillion in electricity subsidies in 2024.

This is a sharp increase of 219.67% from the N610 billion recorded in 2023, according to the Nigerian Electricity Regulatory Commission (NERC).

The significant rise in subsidy spending comes despite the Band A tariff hike introduced in April 2024. Analysts and regulators attribute the surge to macroeconomic pressures triggered by the floating of the naira and the removal of fuel subsidies, both of which have intensified inflation and operational costs in the energy sector.

In its latest report, NERC disclosed that the government’s subsidy covered the gap between cost-reflective tariffs (the actual cost of supplying electricity) and the lower tariffs approved for customers. However, only N371.34 million, just 0.019% of the total N1.94 trillion, was paid as of the time of reporting.

“It is important to note that due to the absence of cost-reflective tariffs across all DisCos in 2024, the government incurred a subsidy obligation of N1.94tn, which translates to an average of N161.85bn per month. This obligation is largely attributable to the FG’s policy to freeze allowed tariffs paid by customers despite the increase in cost-reflective tariffs,” NERC stated.

The regulator noted that the total subsidy obligation accounted for 62.59% of the total invoices issued by the Nigerian Bulk Electricity Trading Company (NBET) to the electricity distribution companies (DisCos).

In contrast, NERC’s 2023 report revealed a much lower subsidy bill of N610.06 billion, representing 47.08% of NBET invoices, while DisCos were required to remit 52.92% of N1.29 trillion issued by NBET that year.