The Nigerian Electricity Regulatory Commission (NERC) has revealed that the Federal Government’s expenditure on electricity Subsidies is projected to reach ₦2.4 trillion by the end of 2024. This development was announced during the PwC Annual Power and Utilities Roundtable in Lagos, where Dr. Yusuf Ali, NERC’s Commissioner for Planning, Research, and Strategy, shared details of the escalating subsidy costs. As of November, subsidy payments had already reached ₦1.9 trillion, with an estimated monthly increase of ₦260 billion expected to culminate by December.
Meanwhile, the annual figure is a calculated projection based on the cost-reflective tariff and approved consumer tariff variations. Dr. Ali explained that each month, NERC assesses the disparity between the actual cost of power production and the approved consumer tariff to determine subsidy allocations. The final figure for 2024 will depend on consumption patterns and tariff trends. He attributed fluctuations in subsidy amounts to challenges in foreign exchange and adjustments in energy tariffs. The ₦2.4 trillion estimate reflects efforts to balance affordable consumer pricing with the rising energy production costs.
Strategic policies are needed to address challenges like vandalism.
Adebayo Adelabu, the Minister of Power, represented by his Chief Technical Adviser, Adedayo Olowoniyi, outlined the government’s initiatives to address the sector’s critical challenges. He noted that a draft Integrated National Electricity Policy, developed in partnership with PricewaterhouseCoopers (PwC), seeks to revamp the sector’s Infrastructure and regulatory frameworks. The policy aims to implement cost-reflective Tariffs to attract private investments and ensure sustainability. Adelabu emphasised the need for a Market Environment that ensures returns for Investors as a foundation for achieving universal access and 24-hour electricity supply.
Nigeria’s power sector continues to face challenges, including infrastructure vandalism and inefficiencies in the value chain. Adelabu revealed that the Transmission Company of Nigeria (TCN) spent nearly ₦10 billion within six months repairing vandalised facilities. These issues and grid disturbances stemming from capacity inadequacies have hampered progress. The government’s response includes building new substations, upgrading networks, and introducing policies to strengthen the sector’s operations. The PwC-supported Integrated National Electricity Policy addresses inefficiencies, ensures market discipline, and improves energy delivery to vulnerable groups.
Importance of energy subsidies lies in making power affordable.
Furthermore, the policy strongly emphasises infrastructure development to modernise the nation’s power sector and improve reliability. This involves upgrading existing transmission and distribution networks, building new substations, and addressing inefficiencies across the value chain. Adelabu emphasised the administration’s dedication under the Renewed Hope Agenda, focusing on implementing the transformative Electricity Act of 2023 and advancing the Presidential Power Initiative in partnership with Siemens. These initiatives aim to create a sustainable power market that promotes investor confidence, ensures long-term stability, and ultimately provides universal access to reliable power for all people.
Energy subsidies in Nigeria include consumer-focused support for gasoline, kerosene, and electricity. For electricity, the government maintains tariffs below production costs, reimbursing utility companies through subsidies. However, this approach has historically hindered maintenance and reinvestment in the sector, leading to accessibility and reliability issues. Between 2005 and 2009, Nigeria spent over ₦232.5 billion on energy subsidies. These subsidies have strained government finances, caused inefficiencies, and left businesses struggling with high operational costs due to unreliable power supply.
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To address these challenges, the government gradually increases power tariffs to cover production costs while ensuring affordability for low-income consumers. The shift toward cost-reflective pricing is expected to promote sector Sustainability and attract much-needed investments. Adelabu called on stakeholders to embrace innovative solutions to secure the sector’s future. He stressed that restoring confidence in the sector requires a collective commitment to implementing bold ideas and promoting resilience. By addressing core challenges and introducing strategic reforms, Nigeria aims to create a sustainable power market that balances affordability, reliability, and Investment appeal.