The Federal Government’s electricity subsidy skyrocketed to N1.94 trillion in 2024, marking a 219.67% increase from the N610 billion recorded in 2023, according to the Nigerian Electricity Regulatory Commission (NERC).

Despite an April tariff hike for Band A customers, the government covered only 0.019%, N371.34 million, of the total subsidy obligation, leaving a gaping deficit in the power sector. The sharp rise was driven by the naira float and fuel subsidy removal, which led to inflation and increased energy production costs.

NERC said the hike was due to the government’s decision to freeze electricity tariffs at December 2022 levels, despite rising cost-reflective tariffs. “The subsidy reached N633.30bn in Q1 2024, up 303% from the 2023 quarterly average of N157.15bn,” the report stated.

A tariff adjustment for Band A customers in April led to a 40% drop in the subsidy burden in Q2, down to N380.06bn. However, another tariff freeze in July triggered a fresh spike, with subsidies climbing to N464.12bn in Q3 and N471.69bn in Q4.

By the end of 2024, Abuja, Ikeja, and Ibadan DisCos had the highest subsidy allocations, N285bn, N272bn, and N236bn respectively. Meanwhile, Yola DisCo received nearly twice the average subsidy per unit due to a high cost-reflective tariff of N266.64/kWh, a result of insecurity and operational costs.

Nationally, the average cost-reflective tariff stood at N175.31/kWh, while the allowed tariff was N100.27/kWh, leaving a subsidy gap of N75.04/kWh.

With the Federal Government struggling to meet its obligations, NERC warned of growing debts in the power sector, now nearing N5 trillion, and hinted at an inevitable transition to cost-reflective tariffs.