Nigeria Faces Possible Electricity Tariff Hike in October as Power Subsidy Hits N181.63bn
Abuja, Nigeria – Another electricity tariff hike may be on the horizon for October 2024, as the Nigerian Government grapples with a growing monthly power subsidy that reached N181.63 billion in September.
This marks a significant rise from the N102.30 billion subsidy recorded in May 2024. Over the past few months, government expenditures on electricity subsidies surged to N163.87 billion in July, N173.88 billion in August, and N181.63 billion in September.
The increase follows the Nigerian Electricity Regulatory Commission’s (NERC) announcement in April 2024 of the removal of subsidies for customers on Band A feeders, which are those enjoying at least 20 hours of electricity daily. At that time, the monthly subsidy stood at N140.7 billion.
As part of the changes, NERC approved a tariff hike for Band A consumers, raising the electricity cost to N225 per kilowatt-hour (kWh). This move, however, sparked widespread dissatisfaction across various sectors, including labour unions, education, and healthcare, as many saw their electricity bills triple.
In May, a slight reprieve came when the subsidy decreased to N102.30 billion, prompting a tariff reduction to N206.80/kWh. NERC attributed this adjustment to a decline in the naira-to-dollar exchange rate. By July, however, the tariff was raised again to N209/kWh as subsidies surged back to N158 billion in June.
The current period has seen a sharp rise in both the subsidy and the exchange rate, with NERC citing dollar exchange rates of N1,494.1 in July, N1,564.3 in August, and N1,601.5 in September.
Additionally, the benchmark gas-to-power price remains at $2.42 per Million British Thermal Units (MMBtu), according to the Nigerian Midstream and Downstream Petroleum Regulatory Authority, in line with the Petroleum Industry Act of 2021. This benchmark underscores the rising cost of power generation in Nigeria.
The combined effects of high inflation, which stood at 32.15% in August 2024, and escalating power generation costs have fueled concerns that a further tariff increase may be implemented in the upcoming Multi-Year Tariff Order unless these factors are mitigated.
