BY FESTUS OKOROMADU
The Nigerian Electricity Regulatory Commission has disclosed that the Federal Government subsidized electricity consumption in the country to the tune of N204.59 billion between July and September 2023.
This was contained in NERC’s third quarter 2023 report released on Friday.
According to NERC, this is due to the fact that electricity distribution companies are not allowed to apply cost-reflective tariffs charges in the sector.
While insisting that the government is paying subsidy on electricity as Nigerians are not paying the appropriate tariffs for the commodity, the report said, “In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff shortfall funding.
“This funding is applied to the Nigerian Bulk Electricity Trading Plc) NBET invoices that are to be paid by DisCos. The amount to be covered by the DisCos is based on the tariff that they are allowed to charge and set out as their Minimum Remittance Obligation (MRO) in the periodic Tariff Orders issued by the Commission.
“It is important to note that due to the absence of cost-reflective tariffs across all DisCos, the government incurred a subsidy obligation of 204.59 billion in 2023/Q3 (average of N68.20 billion per month), which is an increase of N69.37 billion (+51.30 percent) compared to the N135.23 billion (average of N45.08 billion per month) incurred in 2023/Q2; this increase is largely attributable to the government’s policy to harmonize exchange change rates.
“The rise in the government’s subsidy obligation meant that in Q 23/Q3, DisCos were only expected to cover 45.00 percent of the total invoice received from NBET. For ease of administration of the subsidy, the MRO is limited to NBET only with the MO being allowed to recover 100 percent of its revenue requirement from the DisCos.
“In 2023/Q3, the MRO-adjusted invoice from NBET to the DisCos was N167.40 billion while the total remittance made was N124.53 billion, which translates to a 74.39 percent remittance performance,” the NERC explained.
The report noted that DisCos remittance level declined in the quarter under review by 24.60 percent, saying “The remittance performance of DisCos to NBET in 2023/Q3 (74.39 percent) is a -24.60pp decrease compared to the 98.99 percent remittance performance recorded in 2023/Q2”.
It added that, “The notable decline in remittance performance by DisCos is a result of the -18.29% decrease in remittance in 2023/Q3 (N124.53 billion) compared to 2023/Q2 (N152.48 billion) in spite of the fact that the MRO adjusted invoice in 2023/Q3 (N167.40 billion) increased by 8.67% compared to 2023/Q2 (N154.04 billion).”
