By Gloria Ogbonna
Nigeria's power sector continues to grapple with a significant fiscal challenge, as data from the Nigerian Electricity Regulatory Commission (NERC) indicates a substantial government subsidy in the electricity domain.
Between January and September this year, the Federal Government allocated a sum of N375.8 billion for electricity subsidy, coinciding with power consumers' collective payment of N782.6 billion during the same period.
The latest figures, obtained from the NERC in Abuja, highlight the consistent government subsidy across the first, second, and third quarters of 2023, in response to the absence of cost-reflective tariffs. Despite power distribution companies billing a total of N1.06 trillion during these nine months, actual collections amounted to only N782.6 billion, underscoring the impact of persistent power outages experienced in various parts of Nigeria.
The subsidy allocation saw a noteworthy rise from N36 billion in the first quarter to N135.2 billion in the second quarter, further escalating to N204.6 billion in the third quarter of the year. The impending figures for the fourth quarter are yet to be disclosed, as 2023 is still ongoing.
NERC's report attributes the subsidy to the disparity between cost-reflective tariffs and allowed tariffs, prompting the government to bridge this gap by covering tariff shortfalls. This shortfall funding is specifically directed towards Nigerian Bulk Electricity Trading Company (NBET) invoices to be paid by Discos (Distribution Companies), forming a portion of the Minimum Remittance Obligation (MRO) outlined in periodic Tariff Orders issued by the Commission.
Despite these interventions, the persisting absence of cost-reflective tariffs necessitated a significant increase in the government's subsidy commitment in the third quarter of 2023, resulting in Discos covering only 45 percent of the total invoices received from NBET. The report also highlights the discrepancy in collection efficiency among Discos, citing a 76.56 percent collection rate in the third quarter.
Furthermore, it details the remittance performance by Discos, revealing a 75.91 percent remittance rate in the third quarter, indicating a decrease compared to the preceding quarter's 95.21 percent. This decline poses concerns about the overall financial health of the electricity sector, with an outstanding balance amounting to ₦50.27 billion in 2023/Q3.
Chijioke James, the President of the Electricity Consumers Association of Nigeria, expressed skepticism about the lack of transparency regarding the government's subsidy payments and the tariff regime. He emphasized the need for a more transparent process to elucidate the precise nature and mechanism of the subsidy, enabling stakeholders to conduct a thorough cost-benefit analysis and ensure equitable treatment for all parties involved.
Source Punch
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