Nigeria’s Electricity Subsidy to Hit ₦2.4 Trillion in 2024 as Infrastructure Issues Persist

With the demand for electricity in Nigeria rising, poor infrastructure remains a big challenge for the power sector. The Federal Government’s spending on electricity subsidies is expected to reach ₦2.4 trillion by the end of 2024, a massive jump of 293% compared to the ₦610 billion spent last year. 

 

Yusuf Ali, a commissioner at the Nigerian Electricity Regulatory Commission (NERC), highlighted that this sharp increase is linked to changes in Nigeria’s overall economic conditions.

 

He made this known on Thursday at the just concluded PwC’s Annual Power and Utilities Roundtable themed “Reigniting hope in Nigeria’s electric power sector” held in Lagos.

 

“Action was taken in April to increase tariff for band A to reduce subsidy by like over 100 billion but unfortunately, there has been some level of backsliding in the macroeconomic environment, which has meant that the allowed tariff hasn’t moved, but the cost is reflective going up.”

 

“And as long as that happens, the subsidy will only continue to increase. So right now, the best estimate that we have for 2024 is that the cumulative subsidy for the year will be 2.4 trillion,” he added.

 

The Commission’s recent report, published on Sunday, indicated that the federal government had already incurred N1.91 trillion in electricity subsidy obligations in the first 11 months of the year. The report also highlighted improved revenue collection by power distribution companies (DisCos), which recorded N1.23 trillion in revenue between January and September 2024, surpassing the N1.08 trillion collected in the entire year of 2023.

 

Meanwhile, the Minister of Power, Adebayo Adelabu has expressed that the ageing infrastructure is a big challenge in the industry.

 

Adelabu revealed that recent increase in vandalisation is costing Transmission Company of Nigeria (TCN), around N10 billion, just as Nigerian Bulk Electricity Trading disbursed N8 trillion in nine years. The figures were part of the key highlights that came out at the PWC’s annual power and utilities roundtable

 

Speaking at the event, the Minister of Power, Adebayo Adelabu, said the theme resonates deeply with the present administration’s collective mission to restore trust, drive innovation, inclusive growth and deliver tangible results in the power sector.

 

He said the present administration in Nigeria, led by President Bola Tinubu with the Renewed Hope Agenda, recognizes that energy is not merely a commodity.

 

Represented by his Chief Technical Adviser, Adedayo Olowoniyi, Adelabu, however, decried the ageing infrastructure and all other sectoral issues that makes managing the value chain difficult.

 

His words: “Part of the challenge we’ve seen in Nigeria is that getting stakeholder buy-in often is a challenge. And that is why managing the value chain, especially electricity value chain in Nigeria is a big challenge. We have so many participants that may not want to follow market rules.

 

Also, the Acting MD/CEO, Nigeria Bulk Electricity Trading Plc (NBET), Mr. Johnson Akinnawo, made some remarks at the event by revealing that they have disbursed N8 trillion since 2015.

 

He said they would continue to play the role of off-taker even and push for bilateral trading with their renewal for three more years.

 

According to him, “Since 2015 the market transaction that we have settled successfully without hitches is N8 trillion. The implication is that we are still in the market for another three years to continue to play the role that the government has put us to play.

“We expect us to continue to play our role, which is being a credible off-taker, supporting government policy and implementing government directives.”

 

He hinted that they would “transform to an energy exchange to further support the markets, drive the move for the market to go into bilateral, which is the market that is governed by contractual discipline.”

 

On the issue of state market, the MD of Benin Electricity Distribution Company, Mr. Deolu Ijose, advocated the need for the state governments to train their staff to understand necessary frameworks.

 

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