The Federal Government has highlighted the need for approximately N3.2 trillion to subsidise electricity in 2024 to reverse the tariff increase. Sanusi Garba, Chairman of the Nigeria Electricity Regulatory Commission (NERC), emphasised this during a stakeholders meeting organised by the House of Representatives Committee on power in Abuja.
Garba pointed out that the current investments in the power sector are insufficient to ensure stable electricity nationwide. He identified addressing foreign exchange fluctuations and non-payment for gas as crucial, warning of a potential collapse of the sector if these issues are not resolved.
Before the tariff review, Electricity Distribution Companies (DisCos) were only required to pay 10% of their energy invoices, leading to liquidity challenges due to the lack of cash backing for subsidies. This lack of subsidy payments resulted in decreased gas supply and power generation, contributing to frequent reductions in generation and system collapses.
Garba highlighted that from January 2020 to 2023, the tariff increased from 55% to 94% of cost recovery. He mentioned that the unification of foreign exchange rates and current inflationary pressures were driving the cost-reflective tariff to N184/kWh.
He underscored the necessity of action, stating that if nothing is done, it would require the National Assembly and the Executive to provide approximately N3.2 trillion to cover the subsidy in 2024. Garba also noted a funding gap for the subsidy, as only N185 billion out of the N645 billion subsidy in 2023 was cash-backed.