Electricity Tariffs Set to Rise as Nigeria’s Power Subsidies Surge to N181.63bn

A fresh electricity tariff hike may be on the horizon for Nigerians in October 2024, as the nation’s monthly power subsidy surged to N181.63 billion in September. This marks a significant increase from the N102.30 billion recorded in May, raising concerns about the financial sustainability of electricity subsidies.

Over the past three months, the Nigerian government has progressively increased its power subsidy payments, with N163.87 billion disbursed in July, followed by N173.88 billion in August, and the latest figure of N181.63 billion in September.

This comes on the heels of the Nigerian Electricity Regulatory Commission’s (NERC) decision in April 2024 to remove subsidies for certain electricity consumers on Band A feeders, a move aimed at easing the financial burden on the government. At the time, NERC reported that the monthly subsidy stood at N140.7 billion.

In response, NERC approved a tariff increase for consumers receiving at least 20 hours of power daily, raising their rates to N225 per kilowatt-hour (kWh). The tariff hike sparked widespread backlash from Nigerians, including labor unions and essential sectors like education and healthcare, as their electricity bills tripled.

In May, the subsidy briefly dropped to N102.30 billion, leading to a reduction in Band A tariffs to N206.80/kWh, driven by a favorable exchange rate of the naira to the dollar. However, the tariffs rose again in July to N209/kWh, as the subsidy increased to N158 billion in June.

The exchange rate for determining electricity tariffs has also fluctuated, with NERC setting rates at N1,494.1 per dollar in July, N1,564.3 in August, and N1,601.5 in September. Additionally, the cost of gas-to-power remains a major factor, with the benchmark price set at $2.42/Million British Thermal Units by the Nigerian Midstream and Downstream Petroleum Regulatory Authority, as per the Petroleum Industry Act 2021.

Amid these rising costs, Nigeria’s inflation rate stood at 32.15 percent in August 2024, further fueling speculation that another electricity tariff increase could be implemented in October, unless the cost of power generation declines.