T he Nigerian government is planning to spend approximately N2.36 trillion on electricity subsidies in 2025 to support low-income consumers, despite efforts to implement cost-reflective tariffs. This comes amid a report from the Nigerian Electricity Regulatory Commission (NERC) revealing that the government incurred a N178.03 billion subsidy in January 2025, a decrease from the previous month’s N197.91 billion.
The subsidy costs reflect a reduction in the weighted average cost-reflective tariff, which dropped from N213.85 per kilowatt-hour in December 2024 to N116.75 per kilowatt-hour in January 2025. While this reduction in subsidy spending might seem positive, it highlights the ongoing financial challenges of Nigeria's power sector.
In 2024, the government incurred N2.37 trillion in subsidies, but only N450 billion was cash-backed, leaving a N1.92 trillion shortfall. The government faces a projected tariff shortfall of N2.36 trillion in 2025, with no anticipated funding for the gap. Efforts to introduce cost-reflective tariffs have been met with resistance due to concerns about rising living costs and unreliable power supply.
To help bridge the gap between the cost of power generation and regulated electricity rates, the government has also announced plans to introduce a $600 million annual subsidy for electricity consumers from 2025 to 2027. This initiative aims to support a transition to cost-reflective tariffs while addressing the metering deficit and improving the sustainability of power distribution companies.
Despite the government's efforts to reform the power sector, challenges remain, with many consumers and stakeholders questioning the feasibility and fairness of tariff increases without improvements in power supply. Critics argue that higher tariffs alone will not solve Nigeria's ongoing electricity problems, with the demand for power continuing to exceed supply.
0 Comments