NEWS

FG Suspends Tariff Hike, To Pay N1.6trn Subsidy In 2024

Yesterday, the Nigerian Electricity Regulatory Commission (NERC) unveiled a new electricity tariff scheme for the eleven distribution companies (DisCos).

However, despite the approved tariff adjustment, the DisCos won’t implement the increase due to the Federal Government’s commitment to subsidize consumers with N1.6 trillion in 2024. This amounts to a monthly average of N120 billion.

NERC clarified that, under this new policy, electricity tariffs will remain unchanged, maintaining the rates set since December 2022. As part of the analysis for DisCos, it was revealed that the government will allocate N233.26 billion (or N19.44 billion monthly) as subsidies for consumers served by the Abuja Electricity Distribution Company (AEDC) franchise in 2024.

While AEDC initially requested N151.07 as a cost-reflective tariff per kilowatt-hour, the Commission approved a lower rate of N120.88/kWh. With the tariff freeze, consumers will be billed at N63.24/kWh, while the government will cover the difference, paying N58.12/kWh.

For consumers under Ikeja Electric, the government is set to allocate N238.20 billion (or N19.85 billion monthly) as subsidies in 2024. Despite IKEDC’s initial request for a cost-reflective tariff of N128.18/kWh, the Commission approved a lower rate of N112.10/kWh. With the current tariff freeze, consumers will only be charged N56.60/kWh, while the government covers the difference, paying N55.50/kWh as a subsidy.

In the case of Enugu DisCo’s franchise area, the government will provide N129.92 billion (or N10.74 billion monthly) in subsidies for consumers in 2024. EEDC sought N155/kWh as a cost-reflective tariff, but the Commission sanctioned a lower rate of N128/kWh. With the frozen tariff, consumers will pay N59/kWh, and the government will contribute N69.40/kWh as a subsidy.

As for Benin DisCo, consumers are poised to benefit from a cumulative subsidy of N140.85 billion (or N11.74 billion monthly). Despite the utility’s ambitious request for N277.70/kWh as a cost-reflective tariff, the regulator approved a more moderate N126/kWh. Under the new policy, consumers will be charged N60.10/kWh, with the government covering the remaining amount, paying N65.90/kWh as a subsidy.

In a statement to reporters in Abuja, Engr. Sanusi Garba, the Chairman of NERC, clarified that despite the approval of rate increases in the new Multi-Year Tariff Order 2024, the Federal Government’s directive ensures that consumers will not experience higher electricity prices.

He explained: “For the first time, we have published what each DisCo should charge and we have also published the amount they are allowed to charge based on government policy because the government has decided to in the meantime continue to pay subsidies.

“If you check the order, you will see that tariffs are not going up but you will see what the DisCos should have been charging and you can also see in the tariff order the amount of subsidies the government will be paying to cover the gap”, he added.

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