The Nigerian Electricity Regulatory Commission (NERC) has revealed that the federal government paid a total of ₦171.25 billion in electricity subsidies during the first half of 2023.
These subsidies were necessary due to the absence of cost-reflective tariffs across all distribution companies.
According to NERC’s second-quarter report, dated October 17, 2023, the subsidy was divided into ₦36.02 billion in the first quarter (Q1) and ₦135.23 billion in the second quarter (Q2). The increase in Q2 was primarily attributed to the government’s policy of harmonising exchange rates.
To bridge the gap between the cost-reflective and allowed tariffs, the government utilised tariff shortfall funding. This funding was applied to the invoices from the Nigerian Bulk Electricity Trading (NBET), which were to be paid by the Distribution Companies (DisCos).
The government’s subsidy obligation for Q2 amounted to ₦135.23 billion, a significant increase of ₦99.21 billion (275%) compared to the ₦36.02 billion incurred in Q1.
NERC highlighted that this meant DisCos were only expected to cover 53.25% of the total invoice received from NBET during Q2. The report also revealed that the average monthly subsidy incurred by the government in Q2 was ₦45.08 billion.
In terms of DisCos’ financial performance, the report stated that their revenue for Q2 reached ₦267.86 billion, achieving a collection efficiency rate of 75.5%. This marked an improvement from the 68.75% collection efficiency recorded in Q1.
Collection efficiency is the ratio of the amount collected from customers, compared to the amount billed by DisCos. In this case, a collection efficiency of 75% implies that approximately 25% of the billed amount remains unrecoverable from customers.
The report further highlighted that all DisCos, except for Yola DisCo, experienced an improvement in collection efficiency during Q2. Notable increases were seen in Kaduna, Ikeja, and Enugu DisCos, with collection efficiency ranging from 44.27% to 76.29%.
On the other hand, Yola DisCo witnessed a slight decrease in collection efficiency from 45.71% to 45.27% during the same period.
