Subsidy vs. Revenue: N629bn Spent on Electricity as Discos Generate N1.1tn

The Federal Government of Nigeria incurred N628.61 billion in electricity subsidies in 2023, as indicated by the latest data from the Nigerian Electricity Regulatory Commission (NERC). During the same period, power distribution companies (Discos) collected a total revenue of N1.08 trillion.

Breakdown of Quarterly Subsidies

– Q1 2023: N36.02bn
– Q2 2023: N135.23bn
– Q3 2023: N204.6bn
– Q4 2023: N252.76bn

The increase in subsidies was primarily driven by the government’s policy to harmonize exchange rates while maintaining the end-user tariffs at the December 2022 levels.

Discos’ Revenue Collection

– Q1 2023: N247.09bn
– Q2 2023: N267.86bn
– Q3 2023: N267.61bn
– Q4 2023: N294.95bn

Despite the rise in revenue, consumers continued to criticize the power companies for inadequate service delivery.

The Federal Government provides these subsidies to cover the gap between cost-reflective tariffs and the allowed tariffs paid by consumers. This is primarily to support the Nigerian Bulk Electricity Trading Company (NBET), which manages the power trading in the sector. Transmission and administrative service costs are fully recovered from Discos, whereas the government covers a significant portion of the power generation costs.

The government’s subsidy obligations increased due to exchange rate harmonization policies, impacting the minimum remittance obligations (MRO) of the Discos. This led to significant government spending to maintain electricity generation and supply.

In Q4 2023, Discos collected 73.79% of the billed amount (N294.95bn out of N399.69bn), a slight decrease from Q3 2023. However, the increase in revenue collection did not translate into improved services, prompting widespread consumer dissatisfaction.

Consumers, represented by groups such as the Nigeria Electricity Consumer Advocacy Network (NECAN), expressed frustration over poor power supply and the lack of network improvements by Discos. They pointed out that despite higher revenues, many customers still face inadequate power supply and are often overbilled due to the high percentage of unmetered connections.

NERC identified significant overbilling of unmetered customers by Discos, amounting to N105bn in overcharges in 2023. As a corrective measure, NERC plans to deduct 10% of the overbilled amount from the annual allowed revenues of the Discos in the next tariff review.

Specific Overbilling Instances

– Abuja Disco: N17.874bn
– Eko Disco: N13.137bn
– Port Harcourt Disco: N14.187bn
– Kaduna Disco: N1.145bn

NERC emphasized that Discos must refund the overcharged amounts to customers and adhere to the capping of estimated bills as per the regulatory orders.

The substantial subsidies provided by the Federal Government highlight the ongoing financial challenges in achieving cost-reflective tariffs in Nigeria’s electricity sector. Despite the revenue gains by Discos, the persistent consumer complaints and regulatory fines underscore the need for significant improvements in service delivery and operational efficiency within the sector.