Nigeria electricity subsidy 2024 hit ₦1.94 trillion as tariffs remained frozen, despite rising costs. NERC cites forex and inflation as major subsidy drivers
The federal government of Nigeria spent a staggering ₦1.94 trillion on electricity subsidies in 2024, the Nigerian Electricity Regulatory Commission (NERC) has revealed.
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The figure, disclosed in NERC’s 2024 annual report, reflects 62.59% of the total invoice from the Nigerian Bulk Electricity Trading (NBET) Plc. On average, the government paid ₦161.85 billion monthly to bridge the tariff gap.
According to the report, the subsidy burden surged due to the government’s directive to freeze customer tariffs at December 2022 levels, despite rising market costs linked to currency depreciation and inflation.
“The FGN directive to freeze all customer tariffs at the December 2022 approved rates, despite the increase in the cost-reflective tariffs arising from the major increase in FX rates caused the FGN subsidy to reach ₦633.30 billion in 2024/Q1,” NERC stated.
By comparison, subsidy figures in previous years were significantly lower—₦157.15 billion per quarter in 2023 and ₦35.21 billion in 2022.
In April 2024, NERC approved a tariff hike for Band A customers—from ₦66/kWh to ₦225/kWh—as part of an effort to curb subsidy obligations. However, this was revised in May to ₦206.80/kWh.
While Bands B to E retained their 2022 rates, the commission hoped the new Band A pricing would reduce total subsidy exposure by up to ₦1.14 trillion over the year.
Though subsidy spending dropped to ₦380.06 billion in Q2, it climbed again in Q3 and Q4 to ₦84.06 billion and ₦91.63 billion, respectively, as macroeconomic pressures widened the gap between actual and allowed tariffs.
To reform the subsidy system, NERC introduced a new framework in January 2024. It replaced the Minimum Remittance Obligation (MRO) with the DisCo Remittance Obligation (DRO) model.
“The DRO represents the ratio of the total GenCo invoice that is billed to the DisCos by NBET based on what the allowed DisCo tariffs can cover,” the report explained.
NERC said the switch became necessary to protect the financial stability of distribution companies, which had struggled with unpaid subsidy debts and reduced infrastructure investment.
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Despite reforms, the government continues to fund the difference between market and approved rates through what NERC calls “tariff shortfall funding.”
