The Federal Government disbursed approximately ₦205 billion as electricity subsidy in the third quarter of last year, as revealed by data from the Nigerian Electricity Regulatory Commission (NERC) in its latest report.

According to the Commission’s third quarterly market report, the government incurred a subsidy obligation of about ₦205 billion in 2023/Q3, averaging ₦68 billion per month. This marks a significant increase of ₦69 billion compared to the ₦135 billion incurred in 2023/Q2, averaging ₦45 billion per month.

The surge in subsidy payments is attributed primarily to the government’s policy to harmonize exchange rates in the absence of cost-reflective tariffs across all electricity distribution companies (DisCos).

In light of the absence of cost-reflective tariffs, the government assumes responsibility for covering the gap between the cost-reflective and allowed tariffs through tariff shortfall funding. This funding is channeled to the Nigerian Bulk Electricity Trading (NBET) invoices to be paid by DisCos.

Despite the increase in subsidy payments, DisCos’ remittance performance witnessed a decline. In Q3/2023, DisCos were expected to cover only 45% of the total invoice received from the commission, indicating a notable drop in their remittance obligations.

Furthermore, NERC reported that DisCos failed to remit approximately ₦50 billion to the power sector in the third quarter of last year. The cumulative upstream invoice payable by DisCos amounted to about ₦208 billion, out of which only ₦158 billion was remitted, leaving an outstanding balance of ₦50 billion.

The decline in remittance performance is evident in DisCos’ remittance to NBET, which dropped to 74% in 2023/Q3 from 99% in 2023/Q2. The overall collection efficiency of DisCos improved slightly to 76%, with notable improvements observed in some DisCos, including Kaduna, Ikeja, and Yola.

The report emphasizes the importance of prompt payment of upstream invoices for securing the availability of generation and transmission capacities. It underscores the need for DisCos to enhance collection efficiency through metering frameworks and optimization of energy delivery.

Additionally, NERC highlighted the failure of international and bilateral customers to remit payments for services rendered in 2023/Q3, amounting to approximately ₦8.5 billion and ₦2.8 million, respectively.