By Becky Usman

The Nigerian Electricity Regulatory Commission (NERC) has disclosed that the federal government paid a total of ₦171.25 billion as electricity subsidy in the first half of 2023. This subsidy was necessitated by the absence of cost-reflective tariffs in all distribution companies.

In its second-quarter (Q2) report dated October 17, 2023, NERC indicated that the subsidy was divided into ₦36.02 billion incurred in the first quarter (Q1) and ₦135.23 billion in Q2. The increase in Q2 was primarily attributed to the government’s policy of harmonizing exchange rates.

The absence of cost-reflective tariffs led the government to bridge the gap between the cost-reflective and allowed tariff through tariff shortfall funding, which is applied to the invoices from the Nigerian Bulk Electricity Trading (NBET) to be paid by Distribution Companies (DisCos).

The government’s subsidy obligation for Q2 amounted to ₦135.23 billion, representing a significant increase of ₦99.21 billion (275%) compared to the ₦36.02 billion incurred in Q1.

NERC noted that the government’s subsidy obligation meant that, in Q2 2023, DisCos were only expected to cover 53.25 percent of the total invoice received from NBET. The report also revealed that the average monthly subsidy obligation incurred by the government in Q2 was ₦45.08 billion.

Regarding DisCos’ financial performance, the NERC reported that their revenue for Q2 amounted to ₦267.86 billion, achieving a collection efficiency of 75.5%. This marked an improvement from the 68.75% collection efficiency recorded in Q1.

Collection efficiency is the ratio of the amount collected from customers compared to the amount billed by DisCos. In this context, a collection efficiency of 75% implies that approximately 25% of the billed amount remains unrecovered from customers.

The report further highlighted that all DisCos, with the exception of Yola DisCo, recorded an improvement in collection efficiency in Q2. Notable improvements were observed in Kaduna, Ikeja, and Enugu DisCos, with increases in collection efficiency ranging from 44.27% to 76.29%.

Yola DisCo, on the other hand, saw a slight decrease in collection efficiency from 45.71% to 45.27% during the same period.