Nigeria’s Federal Government is facing a significant challenge in subsidizing electricity costs for its citizens. The annual electricity subsidy has skyrocketed by 269% to ₦2.4 trillion in 2024, up from ₦650 billion in 2023.
This substantial increase comes despite efforts to reduce subsidy obligations through the implementation of the Band A tariff service category in April 2024.
Commissioner for Planning, Research, and Strategy at the Nigerian Electricity Regulatory Commission, NERC, Dr. Yusuf Ali, stated this during his presentation at the PwC’s Annual Power and Utilities Roundtable in Lagos, Friday.
Speaking on the theme – Reigniting hope in Nigeria’s electric power sector – Dr. Ali said between 2023 and 2024, macroeconomic shocks, especially foreign exchange instability succeeded in driving cost-reflective tariffs up by 118 per cent while annual subsidy increased by 270 per cent.
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Dr. Ali said by increasing tariff in April 2024, the government intention was to reduce subsidy significantly but the country’s macroeconomic environment negatively impacted on tariff payment.
He emphasized that without the tariff reforms implemented between 2020 and 2023; annual subsidies would have risen significantly, especially amidst the macroeconomic shocks of the past 20 months.
He said: “So right now, the best estimate that we have for 2024 is that the cumulative subsidy for the year will be 2.4 trillion.”
On his part, the Minister of Power, Chief Adebayo Adelabu, said the present administration in Nigeria, led by His Excellency, President Bola Ahmed Tinubu, with the renewed hope agenda, has recognized energy as the backbone of economic growth and job creation.
The Minister, who was represented by his Chief Technical Assistant, Adedayo Olowoniyi, said: “To ensure the sustainability of the energy sector, the Federal Government of Nigeria has implemented a multi-pronged approach spanning across legislation with the enactment of the Electricity Act 2023, policy framework with the development of an Integrated National Electricity Policy, the introduction of national infrastructure development programs to expedite infrastructure expansion, leveraging bilateral funding to derisk investment, sector commercialization to enable project viability and bankability, and strategic partnership with the investment community and development partners to address bottlenecks across the Nigerian Electricity Supply Industry value chain.
“Our successes have not been without its challenges. We have recorded frequent grid disturbances recently and dip in supply level due various factors which include aging infrastructure, resource limitations, capacity inadequacy across the value chain, and predominantly the consistent vandalism experienced on the transmission networks across the country.
“We are actively addressing these challenges to ensure energy security and sustainability across the country. In the short term, we have implemented measures such as reinforcing standard operating procedures, developing detailed maintenance plans for key transmission substations, conducting line tracing on frequently tripping lines based on data analysis, replacing outdated equipment at critical stations, and assessing the integrity of key nodes to prevent future disruptions. For long-term strategies, we are finalizing plans for a super grid project to establish a more robust and resilient grid system.
“Today’s theme reminds us that hope is not a passive sentiment, but an active commitment and we must continue to innovate, collaborate, and implement bold ideas to restore confidence in our sector to deliver an energy future where every Nigerian has access to reliable, affordable, and sustainable power.”