Victor EzejaThe Nigerian government incurred ₦464.12 billion in subsidy obligation in the third quarter (Q3) 2024.
This was revealed in the latest report by the Nigeria Electricity Regulatory Commission (NERC) for Q3 2024.
Join our WhatsApp ChannelAccording to the report, the Federal Government incurred the sum of ₦464.12 billion as subsidy obligation due to the absence of cost-reflective tariff in the electricity services payment system in the country.
According to NERC, the Government undertakes to cover the gap between the cost-reflective and allowed tariff in the form of tariff subsidies.
The subsidy is only applied to the generation cost payable by electricity Distribution Companies (DisCos) to the Nigeria Bulk Electricity Trading (NBET) at source in the form of a DisCo’s Remittance Obligation (DRO). “The DRO represents the total GenCo invoice that is billed to the DisCos by NBET based on what the allowed DisCo tariffs can cover.”
The NERC 2024 Q3 report revealed that a total of ₦842.02 billion was raised by NBET, but the DRO-adjusted invoice to the DisCos was ₦382.90 billion, revealing a shortfall of ₦464.12 billion to be paid by the Federal Government for the quarter under review.
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“Due to the absence of cost-reflective tariffs across all DisCos, the Government incurred a subsidy obligation of ₦464.12 billion,” NERC report for Q3 2024 stated.
This represents 54.71 per cent of total NBET invoice in the period under review.
Further analysis of the data shows that the subsidy obligation of the government increased by ₦84.06 billion, from ₦380.06 billion in Q2 2024 to ₦464.12 billion in Q3 2024.
“The increase in the subsidy obligation of the FGN is a result of the FGN policy to freeze allowed tariffs paid by customers despite the increase in the cost-reflective tariffs,” the report explained.
Out of the ₦382.90 billion that DisCos were meant to remit to NBET, the total remittance made was ₦324.83 billion, which translates to 84.66 per cent remittance performance.
When compared with Q2 2024, it saw a 5.57 percentage point increase in remittance performance of DisCos to NBET. The DRO-adjusted invoice from NBET to DisCos in Q2 2024 was ₦343.76 billion while the total remittance was ₦271.87 billion, which translated to a 79.09 per cent remittance performance. The increase in remittance performance of DisCos to NBET “is attributable to the larger increase in remittance (+19.45%) during the quarter relative to the increase in DRO-adjusted invoice (+11.38%) from NBET.”
Foreign Electricity Customers Owe Nigeria $5.7 million in Q3 2024
The report also revealed that International bilateral customers being served by the Nigerian electricity sector owe the country $25.68 million.
The debtors include Paras-SBEE and Transcorp-SBEE from the Benin Republic, Mainstream-NIGELEC from Niger, and Odukpani-CEET from Togo.
Under an international treaty, Nigeria exports electricity to neighbouring countries like Benin Republic, Togo, and Niger.
According to the report, the six international bilateral customers being supplied by GenCos in the Nigeria Electricity Supply Industry (NESI) made a payment of $6.49 million against the cumulative invoice of $12.19 million issued by the Market Operator for services rendered in Q3 2024.
It further stated that domestic bilateral customers made a cumulative payment of ₦1.56 billion against the invoice of ₦2.1 billion issued to them by the Market Operator for services rendered in Q3 2024.
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NERC noted that some bilateral customers (both domestic and international customers) made payments during Q3 2024 for outstanding debts in previous quarters.
“Odukpani-CEET made a payment of $1.33 million towards outstanding invoices from previous quarters,” the report revealed.
“Similarly, the MO received ₦31.51 million from the domestic bilateral customers (North-South/Star Pipe; ₦9.50 million and Trans-Amadi (OAU/FMPI); ₦22.01 million) towards outstanding invoices from previous quarters.”
It stated that its special customer, Ajaokuta Steel Co. Ltd, along with the host community, failed to make any payments towards the ₦1.26 billion (NBET) and ₦0.11 billion (MO) invoices received in Q3 2024.
The Commission expressed concerns about what it called “longstanding trend of non-payment by this customer,” adding that a continuation of the non-payment could lead to total disconnection from the grid.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
