Nigerian electricity customers on Band A feeders are likely to face another hike in tariffs as the Federal Government struggles with rising electricity subsidy costs. Recent data reveals that the electricity subsidy, also referred to as the tariff shortfall, surged to a staggering N181.63 billion in September, up from N102.30 billion in May. This alarming increase has sparked widespread concerns about a possible tariff hike.
In April, the Nigerian Electricity Regulatory Commission (NERC) announced the removal of subsidies for Band A customers—those receiving a minimum of 20 hours of electricity daily—pushing their tariffs up to N225 per kilowatt-hour (kWh). The subsidy at that time stood at N140.7 billion. The decision to halt subsidies for these customers was aimed at ensuring liquidity in the power sector but has since generated significant backlash from Nigerians, including labor unions, schools, and hospitals, who have seen their electricity bills triple.
By May, the subsidy figure had dropped to N102.30 billion, leading the government to slash the Band A tariff to N206.80/kWh. However, this relief was short-lived as the tariff was raised again in July to N209/kWh, with the subsidy rising to N158 billion. By September, the subsidy had further increased, fueling speculation that another tariff hike might be imminent.
The steep rise in subsidy costs can be attributed to Nigeria’s foreign exchange crisis. The NERC reports that the naira’s value against the dollar has sharply declined, with the exchange rate rising from N1,494.1 in July to N1,601.5 in September. This, combined with the country’s inflation rate of 33.4%, has driven up the cost of power generation. According to NERC, factors like gas prices, the naira-dollar exchange rate, and inflation are key determinants of electricity tariffs.
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In its latest Multi-Year Tariff Order (MYTO), NERC warned that if these economic conditions persist, electricity tariffs could rise even higher in the coming months unless the cost of power generation decreases.
The ongoing increases have already placed a heavy financial burden on households and businesses across the country. Educational institutions, health facilities, and labor groups are among the hardest hit, with many seeing their electricity bills triple after the subsidy was removed for Band A customers. Despite the growing outcry, the Federal Government has yet to approve additional tariff increases, possibly in response to the current economic hardship facing Nigerians, exacerbated by skyrocketing fuel prices.
Electricity Distribution Companies (Discos) are also grappling with the rising costs. Some Discos have reported significant losses as they struggle to pick up the extra energy produced by generation companies. The Discos are demanding that subsidies be removed across all customer bands to reflect the true cost of electricity. A top Disco official noted that the current tariffs are not cost-reflective, making it difficult for them to operate sustainably.
“As it stands, we are operating at a loss. While there is more power being supplied, the problem could be solved with improved tariffs across all bands and increased meter penetration,” said the official, who requested anonymity due to lack of authorization to speak on the matter.
