Nigeria’s Electricity Subsidy Surges to ₦2.4 Trillion Amid Rising Tariffs and Macroeconomic Challenges
Nigeria’s electricity subsidy has skyrocketed by 269%, jumping from ₦650 billion in 2023 to an estimated ₦2.4 trillion in 2024, a development that underscores the growing fiscal pressures in the nation’s power sector.
The sharp increase comes despite the introduction of the Band A tariff service category in April 2024, a reform aimed at reducing subsidy obligations by ₦1.14 trillion. However, macroeconomic challenges, particularly foreign exchange volatility, have significantly driven up costs.
Speaking at PwC’s Annual Power and Utilities Roundtable in Lagos, Dr. Yusuf Ali, Commissioner for Planning, Research, and Strategy at the Nigerian Electricity Regulatory Commission (NERC), revealed the staggering figures.
“Right now, the best estimate we have for 2024 is that the cumulative subsidy for the year will be ₦2.4 trillion,” Dr. Ali stated during his presentation titled Reigniting Hope in Nigeria’s Electric Power Sector.
Dr. Ali explained that while tariff reforms introduced between 2020 and 2023 helped temper rising subsidy levels, macroeconomic shocks over the past 20 months have hindered further progress. He highlighted that cost-reflective tariffs have risen by 118% between 2023 and 2024, adding pressure on subsidy obligations.
Federal Government’s Multi-Pronged Approach
Addressing the challenges, Minister of Power Chief Adebayo Adelabu, represented by his Chief Technical Assistant, Adedayo Olowoniyi, outlined the Federal Government’s strategies to stabilize the sector.
“The current administration, under President Bola Ahmed Tinubu, recognizes energy as a critical enabler of economic growth and job creation,” he said, emphasizing a multi-faceted approach.
Key initiatives include:
- Legislation: The enactment of the Electricity Act 2023 to provide a solid legal framework.
- Policy Development: Formulating an Integrated National Electricity Policy.
- Infrastructure Expansion: Accelerating grid and power infrastructure projects.
The minister also highlighted efforts to attract bilateral funding, enhance sector viability through commercialization, and address inefficiencies in the Nigerian Electricity Supply Industry (NESI) value chain by working with development partners.
Addressing Grid and Supply Challenges
Despite these efforts, Chief Adelabu acknowledged persistent issues, including frequent grid disturbances, supply shortages, and infrastructure vandalism.
To mitigate these, the government has adopted short-term measures such as improving maintenance plans for critical substations and replacing outdated equipment. For long-term resilience, plans for a super grid project are being finalized to create a robust transmission system.
“Our successes have not been without challenges,” the minister admitted, stressing the importance of innovation and collaboration in overcoming them.
Restoring Confidence in Nigeria’s Power Sector
Chief Adelabu concluded by calling for bold ideas and collective action to deliver sustainable power to Nigerians.
“Today’s theme reminds us that hope is not a passive sentiment but an active commitment. We must continue to innovate and implement bold ideas to deliver an energy future where every Nigerian has access to reliable, affordable, and sustainable power.”
The surge in subsidy costs and the government’s strategies underscore the urgent need for reforms to stabilize Nigeria’s power sector, a cornerstone of the nation’s economic development.
